Comprehensive Problems Ch3

# Comprehensive Problems Ch3 - Why or why not 5 Consider a...

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1 Comprehensive Problems Chapter 3 National Income P’ O Tuitional EBA Macroeconomics 2 z Consider an economy described by the following equations: Y = C + I + G, Y = 5,000 G = 1,000 T = 1,000 C = 250 + 0.75(Y-T) I = 1,000 – 50r (a) In this economy, compute private saving, public saving, and national saving. (b) Find the equilibrium interest rate. 3 (c) Now suppose that G rise to 1,250. Compute private saving, public saving, and national saving. (d) Find the new equilibrium interest rate. 4 z If output increase by 20% when one of two inputs increase by 20%, are there constant returns to scale?

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Unformatted text preview: Why or why not? 5 Consider a Cobb-Douglas production function with three inputs. K is capital, L is labor, and H is human capital. The production function is Y = K 1/3 L 1/3 H 1/3 (a) Derive an expression for the marginal product of labor. How does an in the amount of human capital affect the MPL? 6 (b) Derive an expression for the marginal product of human capital. How does an increase in the amount of human capital affect the marginal product of human capital?...
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Comprehensive Problems Ch3 - Why or why not 5 Consider a...

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