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Unformatted text preview: investment demand will a. have no effect on the amount of national saving b. shift the investment demand curve to the left c. increase both investment and the equilibrium interest rate d. have no effect on consumption. II. A Classical Macro Model Using the Classical Macro Model as framework (if needed, assume a two-period economy) analyze the effects of a technological improvement on the main variables of the model. Fill out in the following with (+) if the variable increases, (-) if the variable decreases, and (?) if the variable could either increase or decrease. You must explain your answer. VARIABLE AT EQUILIBRIUM PERMANENT TECHNOLOGICAL IMPROVEMENT TEMPORARY TECHNOLOGICAL IMPROVEMENT Output (Y) Employment (L) Real Wage (W/P) Investment (I) Real Interest Rate (r) Recall that: L s = L s (W/P ; (W/P) e , Wealth, …) L d = L d (W/P ; A, K) S s = S s (r ; (Y-T), (Y-T) e , Wealth, fiscal policy) I d = I d (r ; MPK f , t)...
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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.
- Spring '08