Macroeconomics Answers

18. If an economy is at full employment, an income tax cut will result in:

A. a higher price level and more output in the short run, but only higher output in the long run.
B. a higher price level and more output in the short run, but only a higher price level in the long run.
C. an increase in LRAS and economic growth.
D. a decrease in AD and an increase in capacity.
E. an increase in AD and increased output in the long run.

I have some homework problems involving production functions, cost functions, and game theories. I attempted to complete the assignment, but need.some.help as I'm not sure of my solutions.

f a market is initially in equilibrium, ceteris paribus, an increase in demand will:
A) increase both the equilibrium price and quantity of the good.
B) increase the equilibrium price but decrease the equilibrium quantity of the
good.
C) decrease the equilibrium price but increase the equilibrium quantity of the
good.
D) decrease both the equilibrium price and quantity of the good.
E) None of the above.

21. If a market is initially in equilibrium, ceteris paribus, an increase in supply will:
A) increase both the equilibrium price and quantity of the good.
B) increase the equilibrium price but decrease the equilibrium quantity of the
good.
C) decrease the equilibrium price but increase the equilibrium quantity of the
good.
D) decrease both the equilibrium price and quantity of the good.
E) None of the above

Define income per capita, output per worker and the dependency ratio
and explain the relation between them.
(b) Use your answer to part a) to explain why governments are interested
in increasing both the fertility rate and the female labour force
participation ratio.
(c) Explain paternity leave. Now use your answer to part b) to provide a
rational for the European Union implementing a two-week paternity
leave in 2010.

Suppose the CFO of a British corporation with surplus cash flow had 40 million pounds sterling to invest last March 20, 2016 and the corporation did not believe it would need to utilize these funds to retool or expand production capacity for 1 year. Suppose further that the interest rate on 1-year CD deposits in US banks was 1%, while the rate on 1 year CD deposits in England (denominated in British Pounds) was 1.5% at the time. Suppose further that the exchange rate at that time was $1.50 per British pound. Assume that the CFO of the British company invests in US CD deposits and holds them until maturity 1 year later.

Question) Suppose that now a year later the exchange rate is $1.40 per British pound. What rate of return did the CFO earn on the investment in the British CD? (Note: a specific numeric answer is required)

Write short notes on the following.
a) Ineffectiveness of fiscal policy under flexible exchange rate
b) Nominal rigidity in wage rate and prices

Consider the overlapping generations model where each member lives for two time
periods ‘t’ and (t+1). Assume that individuals work in time period ‘t’ and earn wage
income, while they do not work in time period (t+1) and survive on interest income.
Explain the impact of an increase in interest rate on consumption during time period ‘t’.

State whether you think each of the following questions is true (T), false (F), or uncertain
(U) and briefly explain your answer.
(a) If bread is produced by using a constant returns to scale (CRS) production function,
then if the number of workers doubled, twice as much bread will be produced.
(b) A competitive, prot-maximizing rm hires capital until the marginal product of labor
(MPL) equals money wage (W).

Consider an economy described by the aggregate production function
Y = F(K,L) = K^0.3L^0.7
(a) Does this production function have constant returns to scale (CRS)? Why?
(b) What is the marginal product of capital (MPK)?
(c) What is the marginal product of labor (MPL)?
(d) Use your answers in (b) and (c) above to show that this production function displays
diminishing marginal product (DMP).
(e) Are K and L "complements"? Explain in some detail.
(f) What is the capital share?
(g) When capital per worker rises, what happen to labor share of national income?

Use Table 1 to answer the following questions.
(a) Graph the production function holding K constant.
(b) Graph the MPL curve with MPL on the vertical axis and L on the horizontal axis. Is
MPL diminishing?
<Table 1: Output, Labor, and MPL>
L Y MPL
0 0 -
1 5 5
2 9 ()
3 () 2
4 12 1