This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Economics 202 Name: _______________ Principles of Macroeconomics Professor Melick Problem Set #8 Due Friday April 4, 2008 1. Numerical Problem #3 from Abel and Bernanke Chapter 10, found on page 392. 2a) Using the classical version of the IS/LM/FE graphical framework without misperceptions, as well as graphs for the goods, asset, and labor markets, illustrate and explain the shortrun and longrun effect of a cut in the tax rate on labor income. In each of the four graphs show only three points, an initial general equilibrium before the tax cut (labeled point A), the shortrun equilibrium after the change in the tax cut (labeled point B), and the new longrun general equilibrium (labeled point C). 2b) Using the classical version of the AS/AD graphical framework including the misperceptions theory, as well as graphs for the goods, asset, and labor markets, illustrate and explain the short run and longrun effect of a cut in the tax rate on labor income. In each of the four graphs show...
View
Full Document
 Spring '10
 Jakes
 Economics, Macroeconomics, longrun general equilibrium, initial general equilibrium, Professor Melick Problem

Click to edit the document details