HW6_Ch5 - Name Section Number Recitation Leader's Name...

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Name: ____________________________________ Section Number: ____ Recitation Leader’s Name: _____________________________ Homework 6, Due March 26 at the beginning of class The online portion of this Homework is worth 1o points. 1. Analyze the effects of the following events on the equilibrium values of the real wage, employment, output, the real interest rate, desired investment, desired saving and desired consumption. Your analysis should include appropriate graphs and a verbal explanation. a. A natural disaster destroys a significant amount of the nation’s capital stock. b. A new innovation promises to increase the future marginal product of capital. (Assume that current desired consumption is unaffected by the increase in future income that would naturally follow from increased productivity.) /10 /10
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c. A wave of immigration increases the labor supply. d. Productivity, A, decreases. /10 /10
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2. The following equations characterize a country’s economy. Production function : Y = A · K · N – 3 · N 2 /2. Marginal product of labor : MPN = A · K – 3N. where A = 5 and K = 21. Labor supply
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