ECON 401A Hartman Autumn 2010 PROBLEM SET V (for Thursday, November 4) Let Yreal aggregate output Nlabor Kcapital Wnominal wage rate (*)PPdomestic (foreign) price level Creal consumption Treal taxes Ireal investment )rrdomestic (foreign) real interest rate measured as a percent (*)iidomestic (foreign) nominal interest rate measured as a percent Greal government purchases Mnominal money stock enominal exchange rate in units domestic currency/foreign currency */Qereal exchange rate in units domestic goods/foreign good 1. This problem involves an open economy in which the nominal wage rate is fixed exogenously. No inflation is expected domestically or abroad so irand **, the exchange rate is expected to remain constant, the real and nominal interest rate in the rest of the world is 4, and 16GTwhile 96M. Assume that 1W, and suppose that the production function is 1/28YN. The consumption function is 3()84CY TY T
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