Q: Consider an economy consisting of many imperfectly competitive, price setting firms
Consider an economy consisting of many imperfectly competitive, price setting firms. The profits of the representative firm, firm i, depend on aggregate output, y, and the firm’s real price, ri: πi =...
See AnswerQ: Suppose production at firm i is given by Yi =SLα i
Suppose production at firm i is given by Yi =SLα i , where S is a supply shock and 0
See AnswerQ: Consider an island consisting of N people and many palm trees.
Consider an island consisting of N people and many palm trees. Each person is in one of two states, not carrying a coconut and looking for palm trees (state P) or carrying a coconut and looking for ot...
See AnswerQ: Consider the problem facing an individual in the Lucas model when Pi
Consider the problem facing an individual in the Lucas model when Pi/P is unknown. The individual chooses Li to maximize the expectation of Ui; Ui continues to be given by equation (6.74). (a) Find th...
See AnswerQ: Suppose that the money supply is determined by mt = czt−
Suppose that the money supply is determined by mt = czt−1 +et, where c and z are vectors and et is an i.i.d. disturbance uncorrelated with zt−1. et is unpredictable and unobservable. Thus the expected...
See AnswerQ: Consider an economy consisting of some firms with flexible prices and some
Consider an economy consisting of some firms with flexible prices and some with rigid prices. Let p f denote the price set by a representative flexible-price firm and pr the price set by a representat...
See AnswerQ: Consider a consumer with a steady flow of real purchases of amount
Consider a consumer with a steady flow of real purchases of amount αY,0
See AnswerQ: Consider the following variant of the model in equations (11.
Consider the following variant of the model in equations (11.39) (11.42). The firm’s profits are π = AF(LI +LO)−wI LI −wOLO, where LI and LO are the numbers of insiders and outsiders the firm hires, a...
See AnswerQ: The analysis of Case 1 in Section 6.2 assumes that
The analysis of Case 1 in Section 6.2 assumes that employment is determined by labor demand. Under perfect competition, however, employment at a given real wage will equal the minimum of demand and su...
See AnswerQ: Let gt be growth of output per worker in period tπt inflation
Let gt be growth of output per worker in period tπt inflation, and πW t wage inflation. Suppose that initially g is constant and equal to gL and that unemployment is at the level that causes inflation...
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