MT2_AK_A-1 - either P M or both P and M could rise It is...

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ECON 102 Second Midterm Answer Key: Part A Prepared by: Andrew L. Zaeske A1 : False. In the New Growth Model we have that y = Bk , so the growth rate of y is going to be the same as the growth rate of k . Recall that ˙ k = sBk - ( x + n + δ ) k ˙ k k = sB - ( x + n + δ ) g Y/L = g y + g A = sB - ( x + n + δ ) + x = sB - n - δ Which clearly does not depend on the growth rate of technological progress at all! Recognizing that the savings rate will also affect the growth rate of Y/L is also sufficient. A2 : False. MV = PY so if M goes up that means that PY must go up. This means
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Unformatted text preview: either P , M or both P and M could rise. It is possible that P could remain constant (or even go down) if Y rises, which means that the given statement is false. A3 : False If new entrants are employed: ¯ u = s n + s + f and an increase in n leads to a decline in ¯ u If new entrants are unemployed : ¯ u = n + s n + s + f and ∂ ¯ u n = f ( n + s + f ) 2 > 0, so as n rises, ¯ u will rise as well. 1...
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