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Unformatted text preview: 1.27.2011- Lecture # 7 Savings Trying to Forecast the Market • Extremely Difficult-Almost Impossible • US Home Sales Tumble (Link) o National Association of Realtor reported a 16.7% drop in existing home sales to an annual rate of 5.45 million units o Rebound in housing demand is largely due to government programs thus the recovery is far from self sustaining o Housing recovering from three year slump due to tax credit for first time buyers and low mortgage rates o Tax Credit extended 7 months Should help boost sales o Worry that end of tax credit will falter recovery Production Function • Constant Return to Scale (CRS) o What matters for increasing output per worker is increasing capital per worker • K/L is the capital to labor ratio • If they grow at the same rate, no change in K/L o And no change in Y/L Perfect Competition • Firms maximize profits...
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This note was uploaded on 03/23/2011 for the course ECON 2 taught by Professor Rupert during the Winter '08 term at UCSB.
- Winter '08