Macroeconomics Answers

 Explain what is the „CPI“ and how is it constructed. 

Consider an economy descried by the production function: 𝑌 = 𝐹(𝐾, 𝐿) = 𝐾^0.3 L^0.7

a) Derive the per-worker production function

b) Assuming no population growth or technological progress, find the steady state capita stock per worker, output per worker and consumption per worker as a

function of the saving rate and depreciation rate.

c) Define the Golden rule level of capital.

d) Under the Solow growth model, explain the effects of population growth on the steady-state level of capital and on output per worker (Show on a sketch).

Consider an economy descried by the production function: 𝑌 = 𝐹(𝐾, 𝐿) = 𝐾^0.3L0.7.

a) Derive the per-worker production function

b) Assuming no population growth or technological progress, find the steady state capita stock per worker, output per worker and consumption per worker as a

function of the saving rate and depreciation rate.

c) Define the Golden rule level of capital.

d) Under the Solow growth model, explain the effects of population growth on the steady-state level of capital and on output per worker (Show on a sketch).

Suppose the velocity of money (V) is constant, Money supply (M) is growing at 5% per year, output (Y) is growing at 2% per year and interest rate (r) is 4%. Using the knowledge of the quantity theory of money and the Fischer effect;

a) Solve for i (nominal interest rate)

b) If the Central Bank increases the money supply by 2 percentage point per year, find the change in nominal interest rate

c) Suppose the growth rate of Y falls to 1% per year, what will happen to inflation? What can the Central Bank do if it wishes to keep inflation constant?

Using the IS-LM model,

a) Illustrate a situation in which fiscal policy does not lead to crowding out

b) Illustrate the economic importance of the crowding out effect of fiscal policy

if c=0,5,co=300,I=400,G=300 and T=100 and contractionary fiscal policy is introduced and the government spending decreases to 200 and taxes increases to 150 then the equilibrium level of output and income is equal to 1650.

True or False

Even if the opportunity cost of attending college is high, why do people attend schools?

Select one:

a.

Because potential long term benefits of college degrees are bigger than costs of college

b.

Because costs of college are bigger than potential benefits from college degrees.

Clear my choice

With aid of diagram describe how each of the following will affect the demand for personal computers: (a) a rise in incomes (assuming computers are a normal good); (b) a lower expected price for computers; (c) cheaper software; (d) computers become simpler to operate.

Explain why an expansionary fiscal policy is more appropriate when the economy is in recession. Support your discussion with examples.