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MiniExam3EssayB_Key

# MiniExam3EssayB_Key - Mini Exam 3 Name Section Recitation...

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Mini Exam 3 Name: _________________________________ Section: ________ Recitation Leader: __________________ 1. Assume a closed economy. The production function for an economy is: Y=70N - N 2 . Therefore the marginal product of labor function is MPN=70-2N. The labor supply function is N S =-10+w. The desired consumption function is C d =400+0.5Y-500r and the desired investment function is I d =200-1000r. Government spending is 50. Solve for each variable and put your answers in the boxes provided. For partial credit, you must show your work neatly. All of the answers come out to whole numbers with the exception of r, which comes out to a whole percentage. (For example .03 is acceptable because it is 3%, however, .027 is not acceptable because it is 2.7%.) /10 w N Y r S d I d C d W=70 2N d , so N d =(70 w)/2. Setting N d =N s , (70 w)/2= 10+w. Solving gives w=30 . N s = 10+w=20 or N d =(70 30)/2=20, so N=20 . Y=70(20) 20 2 , so Y=1000 . S d =Y Cd

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MiniExam3EssayB_Key - Mini Exam 3 Name Section Recitation...

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