401ps3-10 - ECON 401A Autumn 2010 Hartman PROBLEM SET...

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ECON 401A Hartman Autumn 2010 PROBLEM SET III (for Monday, October 25) Let Y real aggregate output N labor K capital W nominal wage rate (* ) PP domestic (foreign) price level C real consumption T real taxes I real investment ) rr domestic (foreign) real interest rate measured as a percent (*) ii domestic (foreign) nominal interest rate measured as a percent G real government purchases M nominal money stock e nominal exchange rate in units domestic currency/foreign currency */ Qe  real exchange rate in units domestic goods/foreign good 1. This problem involves a model in which the nominal wage rate is fixed exogenously. The economy is closed, i . e ., there is no international trade. Assume no inflation is expected so the real and nominal interest rates are the same, i.e ., 0 e  so ir . Assume also that W 2 , and suppose that the production function is Y N K 2 12 12 // where K is fixed at K 100 . Assume that the consumption function is 3 () 1 0 4 CY T Y T 
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This note was uploaded on 04/04/2011 for the course ECON 401 taught by Professor Staff during the Spring '08 term at University of Washington.

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401ps3-10 - ECON 401A Autumn 2010 Hartman PROBLEM SET...

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