homework4spring2005

homework4spring2005 - Economics 302 Spring 2005 Homework #4...

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Economics 302 Spring 2005 Homework #4 Due March 30, 2005 1. Consider the Solow growth model with population growth where labor’s share of output is ¾, the savings rate is 15%, the depreciation rate is 7%, and the population growth rate is 3%. a. Find the steady state level of capital per worker and output per worker. (There are exponents involved. Do not use your calculator to reduce them.) b. What is total labor income in the steady state? c. Using the model discuss how the steady state level of capital per worker and output per worker would change for increases in the savings rate, the depreciation rate, population growth rate, or labor’s share of income. 2. Using the model of aggregate demand from Chapter 9 discuss the effects of monetary policy on the price level and output. (At the minimum you should address movements of the aggregate demand curve, the adjustment process, and the differences between the long run and short run aggregate supply curves. Drawing graphs should help in the exposition.)
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homework4spring2005 - Economics 302 Spring 2005 Homework #4...

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