Review Questions for Final

Review Questions for Final - Econ 102 Roger E A Farmer Fall...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ 102 Roger E A Farmer Fall 2008 Revision Questions for the Final 1. Which Swiss school of economics did Hayek associate with business cycle theory? 2. According to Lucas, what are the main qualitative features of business cycles? 3. You are considering whether to invest or not in a certain project. The project requires an investment of $100 this year and $210 next year. a) What is the present value of the cost of this project if the interest rate is 5% per year? b) Suppose that project starts paying $20 forever, beginning next year. What is the present value of your income from the project? c) Using your answers to parts a) and b), determine whether the project is worth undertaking. 4. The production function in a classical economy is given by the expression: 4.1 YA L = where Y is output, L is labor supplied to the market (as opposed to leisure) and A is productivity. Households have preferences over consumption and labor of the form 4.2 () ( ) log log 1 UC =+ L where C is consumption and all output is consumed. Assume that the economy lasts for one period and that households have only labor income. The household has one unit of time. a) Derive expressions for the labor demand curve and the labor supply curve as functions of the real wage. b) How will the equilibrium real wage in equilibrium depend on productivity? c) If productivity were twice as high how would labor and the real wage be different? Explain your answer using the concepts of income and substitution effects.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/27/2009 for the course ECON 102 taught by Professor Serra during the Fall '08 term at UCLA.

Page1 / 4

Review Questions for Final - Econ 102 Roger E A Farmer Fall...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online