homework4spring2008answers

homework4spring2008answers - Economics 102 Spring 2008...

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Economics 102 Spring 2008 Answer to Homework #4 1. Long Run Growth a) t has ity h is steeper than a line through This how we know labor productivity has increased. b) If an epidemic wipes out a quarter of the labor force, we can see in our supply and demand graph that the supply of labor would shift left to the red supply line. There is an obvious decrease in the quantity of labor. The wage rate will increase. Carrying our new equilibrium in the labor market down to our graph of aggregate production, we see that we will have moved left along the aggregate production curve from the blue dot to the red dot. We can see that total outpu fallen somewhat, though the productiv of labor has increased. Remember that labor productivity can be seen on a grap by drawing a line from the origin through the point at which the economy is producing. A line through the red point the blue point. is If the average level of education greatly increases, that means that each member of the labor force is more valuable and has a higher ability to produce than he or she did before being educated. As a result, the aggregate production function shifts upwards in a direction consistent with economic growth. No change is observed in the quantity of labor, or wage rate. We do know, however, that labor productivity has increased. Remember that labor productivity can be seen on a graph by drawing a line from the origin through the point at which
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the economy is producing. A line through the red point is steeper than a line through the black point. This is how we know labor productivity has increased. 2. The Loanable Funds Market
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This note was uploaded on 08/08/2008 for the course ECON 102 taught by Professor Drozd during the Spring '08 term at Wisconsin.

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homework4spring2008answers - Economics 102 Spring 2008...

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