Handout3 - ECON 102. Spring 00. Prof.McDevitt TA Sara Wong...

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ECON 102. Spring 00. Prof.McDevitt TA Sara Wong Office Hours: Th. 5-7pm. Bunche 2263 HANDOUT #3 Week 3 TOPICS: - Consumption-Saving decision - The Solow Growth Model Part I 1. In the classical model, which of the following events can possibly explain a rising real wage rate, falling employment, and rising real output: a) A severe drought hits the economy. It is expected to be temporary. b) A wave of new inventions occurs. The new inventions are expected to have permanent effects. c) A temporary decrease in the crude oil prices. d) A decrease in the labor-force participation rate 2. Labor supply is said to depend upon the expected future real wage rate. But to be more precise, it should be said labor supply depends upon the present value of the expected future real wage rate. Given that an increase in the real rate of interest lowers the present value of future real wages, then a temporary increase in G would be expected to cause the current real wage rate to ……and real output to ……. a)
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This note was uploaded on 10/08/2010 for the course ECON 1b taught by Professor Gescke during the Spring '08 term at Foothill College.

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Handout3 - ECON 102. Spring 00. Prof.McDevitt TA Sara Wong...

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