Apec 3006Yan LiAssignment 1Chapter 2 (#3, #4)Chapter 3 (#4, #9, #11)#3,GDP falls. When the woman employed the butler, she paid him salary, and thiscan be accounted into GDP. If they got married, the woman doesn’t have to pay forhim to buy the service, so the GDP falls.GDP as a measurement has its own limitation. Butler does same kind of job, butin second situation, his labor can’t be recognized as part of GDP. That’s to say,GDP can’t measure the actual situation sometimes.#4,a.Government purchasesb.Investmentc.Next exportd.Consumptione.Investment#4,a. Y=AK^αL^(1-α)α=0.3MPK=αAK^(α−1) L^(1-α)MPL=(1-α) AK^αL^(-α)Capital cost (Capital)=R*K=MPK*P*K=αYK*P*K=α*YPWage (labor)=W*L=MPL*P*L=(1-α)YL*P*L=(1-α) YPSo we can know that the fraction of capital receive is 0.3; the fraction of laborreceive is 9-0.3=0.7b.Y2Y1=1.10.71=1.07 So, the total output increases by 7%.The rental price (MPK) of capital increases, and the real wage (MPL) decreases.
c. K→1.1K,Y2Y1=(1.1)0.3=1.03, So, the total output increases by 3%The rental price (MPK) decreases, and the real wage (MPL) increases.