Questions from Macroeconomics

Q: An economy has a Cobb–Douglas production function: Y =

An economy has a Cobb–Douglas production function: Y = K a(LE)1-a. (For a review of the Cobb–Douglas production function, see Chapter 3.) The economy has a capital share of a third, a saving rate of 2...

Q: In the steady state of the Solow model, at what rate

In the steady state of the Solow model, at what rate does output per person grow? At what rate does capital per person grow? How does this compare with the U.S. experience?

Q: Suppose the Fed reduces the money supply by 5 percent. Assume

Suppose the Fed reduces the money supply by 5 percent. Assume the velocity of money is constant. a. What happens to the aggregate demand curve? b. What happens to the level of output and the price lev...

Q: Give an example of a price that is sticky in the short

Give an example of a price that is sticky in the short run but flexible in the long run.

Q: In the Keynesian cross model, assume that the consumption function is

In the Keynesian cross model, assume that the consumption function is given by C = 120 + 0.8 (Y - T). Planned investment is 200; government purchases and taxes are both 400. a. Graph planned expenditu...

Q: Use the theory of liquidity preference to explain why an increase in

Use the theory of liquidity preference to explain why an increase in the money supply lowers the interest rate. What does this explanation assume about the price level?

Q: Describe the functions of money.

Describe the functions of money.

Q: Use the IS–LM model to predict the short run effects

Use the IS–LM model to predict the short run effects of each of the following shocks on income, the interest rate, consumption, and investment. In each case, explain what the Fed should do to keep inc...

Q: What is the impact of an increase in taxes on the interest

What is the impact of an increase in taxes on the interest rate, income, consumption, and investment?

Q: Over the past several decades, the economies of the world have

Over the past several decades, the economies of the world have become more financially integrated. That is, investors in all nations have become more willing and able to take advantage of financial op...