This preview shows page 1. Sign up to view the full content.
Unformatted text preview: (b) What is the firms desired capital stock? (c) Now suppose that the firm must pay a 50% tax on its revenue. What is the desired capital stock as a result of this tax? 3. What are the three characteristics of assets that are most important to holders of wealth? How does money compare with other assets for each characteristic? 4. Assume that prices and wages adjust rapidly so that the labor market, goods market, and money market are always in equilibrium. What are the effects of each of the following on output, real interest rate and the current price level? (a) A temporary increase in government purchases (b) A reduction in expected inflation (c) A temporary increase in labour supply...
View Full Document
- Summer '07
- J Liu