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Assume risk neutral preferences. Derive the log-linearized system forthe investment dynamics for the model with capital adjustment costsin (14.43) and investment adjustment costs (14.52). Discuss the dif-ferences. 2. Calibrate two RBC models with capital adjustment costs (14.43) andwith investment adjustment costs (14.52), respectively. Use Dynare tosolve these two models and plot impulse responses to a positive onepercent TFP shock for different curvature parameter values?.
The output of a brick maker can be determined by the following production function:
B=K0.75L0.25
Where:
B =number of bricks produced in a given period
L= amount of labour employed
K= amount of capital employed.
If the price of capital is PK, the price of labour is PL and the firm’s total expenditure is E,
i.State the firm’s optimization problem.
ii.Set up the Lagrangian function based on the information provided.
iii.Obtain the first order conditions for optimization.
iv.Derive the optimum combination of inputs.
v.If the price of capital is P20, the price of labour is P30 and the brick maker’s total expenditure on inputs in P120, calculate the firm’s output maximizing input combination.
vi.How may bricks will the brick layer produce in a given period?
Given the Earnings before interest and taxes(EBIT) is Rs 30000 Interest payment is Rs 10000 Dividend on the preference shares Rs9000 Taxes being 50% of the profit before taxes(PBT). Number of outstanding equity shares 10000
What would be the earning per share(EPS) and degree of financial leverage (DFL), What would be the change in EPS, and DFL, if the EBIT increases to Rs50000 and Rs80000 Note- you have to calculate three EPS and three calculations for DFL
Read the paper: De Benedictis, L. (2005). Three decades of Italian comparative advantages, World Economy, pp.1679-1709 (material for lesson 6 in CD).
Find exports data for two countries and the world in 10 sectors of your choice (be careful at the unit of measure, which has to be homogeneous).
Calculate the Balassa index (idem, page 1685 eq.1-3) for each economy/sector (you will have 10 values for each economy)
DATA search suggestions for sectoral data:
UN Comtrade database: https://comtrade.un.org/data/
UNCTADStat: https://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx?sCS_ChosenLang=en
Plot the Balassa index for Economy 1 (on the x-axis) and 2 (on the y-axis) to get a scatterplot graph. Highlight threshold x=1 (vertical line) and y=1 (horizontal line).
Briefly comment upon your graph on the basis of your results.
Find on NBER-CES Manufacturing Database http://www.nber.org/nberces/ the data for sectors, number of total employees and production workers («naics», «emp», «prode»)
Average those numbers in aggregated sectors of production
Rank sectors by skill intensity (from lowest to highest)
Skill intensity is measured by classes of number of Production Workers in thousand;
Production Workers = Unskilled Labor;
Notice: The highest value of «prode» out of total employment corresponds to the lowest level of skill intensity.
Classify sectors by skillness quartiles (25% least skilled sectors, 25% medium-low skilled, 25% medium-high skilled, 25% highly skilled sectors) using the rank in the first part
Choose 3 developing and 3 developed countries and calculate their exports to the US within those sectoral groups
Test graphically for the Leontieff paradox
Discuss your results
Find exports data for two countries and the world in 10 sectors of your choice (be careful at the unit of measure, which has to be homogeneous).
Calculate the Balassa index (idem, page 1685 eq.1-3) for each economy/sector (you will have 10 values for each economy)
Use the production possibility curve (PPC) to answer the question. If Zambia is currently on PPC1,
then point-------------will be an efficient use of resources, while point------------will be unattainable.
What are the major policy conclusions of classical economics? Explain how these
policy conclusions follow from the key assumptions of the classical theoretical
system.
Within the classical model, analyze the effects of an increase in the marginal
income tax rate. Explain how output, employment, and the price level are affected.
Consider cases in which the increased revenue produced by the tax increase
results in a decline in bond sales to the public and in which it results in lower
money creation.
Explain how the interest rate works in the classical system to stabilize aggregate
demand in the face of autonomous changes in components of aggregate demand
such as investment or government spending.
