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Homework 3 - Economics304L: Spring2010 Sadler Homework3 1...

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Economics 304L: Principles of Macroeconomics Spring 2010 Sadler Homework 3 1. In 1931, Babe Ruth was the highest paid player in Major League Baseball, earning an annual salary of $80,000, an amount that was unheard of at the time. In 2007, the highest paid player in baseball was also a New York Yankee, Alex Rodriquez, who earned $27,000,000 that year. Which salary was higher in real terms? Go to the Fred database and use the Consumer Price Index for All Urban Consumers: All Items (not seasonally adjusted) for June 1931 and June 2007 to determine the value of Babe Ruth’s salary in terms of 2007 dollars. ( http://research.stlouisfed.org/fred2/categories/9 ) Problems 2 6 refer to the “Problems and Applications” section at the end of Chapter 12 of Mankiw (p. 270). 2. No. 3 3. No. 7 4. No. 8 5. No. 9 6. No. 10 7. Assume that the production function for the country of Longhornstan depends only on capital (K) and labor (L) inputs, and is given by the Cobb Douglas production function: ܻ ൌ ܣܭ ܮ ଵିఈ , where A is the level of technology in Longhornstan.
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