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Unformatted text preview: Prelim 2 review Question 1 Suppose you were a forecaster of the real wage rate, employment, output, the real interest rate, consumption, investment, and the price level. A shock hits the economy, which you think is a temporary adverse supply shock. a.) What are your forecasts for each of the variables listed above (rise, fall, and no change)? b.) What if the shock was really due to peoples reduced expectations about their future income. Which variables did you forecast correctly, and which did you forecast incorrectly? Question 2 Consider the following Solow economy. y = ak 1 4 . Suppose workers save half of their income, depreciation is 10% and population growth is 10%. Calcuate the steady state values of capital stock, output and consumption. Question 3 How and when has the behavior of business cycles changed over the past century? Question 4 Let Y = AK . 7 N . 3 . If total output grows by 5%, productivity increases by 2%, and population growth is zero, what is the percentage change in the capital stock?and population growth is zero, what is the percentage change in the capital stock?...
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This note was uploaded on 09/03/2009 for the course ECON 3140 taught by Professor Mbiekop during the Spring '07 term at Cornell University (Engineering School).
- Spring '07