Macroeconomics plus MyEconLab plus eBook 1-semester Student Access Kit (6th Edition)

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Econ 304 Sonoma State University Fall 2007 Dr. Robert Eyler Homework #1: Due September 6, 2007 Please show all your work and label all your graphs. Let me know if there are any issues. 1. a. Explain the connection between the definition of GDP according to the “expenditures” approach, and the circular flow of the economy. b. Discuss the difference between real and nominal economic variables, and why real variables are the focus of macroeconomic analyses by discussing GDP and interest rates in both forms. 2. When the labor market is in equilibrium, macroeconomists consider the economy to be in “full employment”. a. Explain the two ways of becoming unemployed, involuntary and voluntary. b. Explain how each of unemployment’s four classic types are all involuntary unemployment. c. Explain how a minimum wage law may cause unemployment by using a
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Unformatted text preview: graph of the labor market and some discussion. 3. The analysis of production has many microeconomic aspects that are aggregated for macroeconomic analyses. a. Describe the profit maximization decision of the firm concerning capital inputs b. Describe the profit maximization decision of a firm to hire labor hours . c. Using the following production function: Y = F(K,L) = AK 0.4 N 0.6 find the optimal capital-labor ratio for the macroeconomy. 4. The interest rate has four definitions in this class. a. State and explain all four definitions b. Explain how the interest rate acts as a “measure of time preference” concerning consumption versus saving. 5. Do problem the problems from the book shown below. a. Numerical Problem #6 in Chapter 2, page 58 b. Numerical Problem #7 in Chapter 3, page 106...
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