ECON 401A
Hartman
Autumn 2010
ANSWERS FOR PROBLEM SET V
1.a.
Labor demanded is given by
2
16
NP
and output supplied is given by
32
YP
.
1.b.i. Since
r
is determined by the world interest rate, the
LM
relationship gives
Y
in terms of
P
and the
exogenously given values of
M
and
r
; it acts as the
AD
relationship in this case.
In equilibrium
2
P
,
64
Y
,
4
r
,
44
C
,
8
I
,
4
Q
, and
4
NX
.
1.b.ii
An increase in
G
(with no change in
T
or
M
) has no effect on
Y.
1.b.iii. An increase in
M
(with no change in
G
or
T
) increases
Y
.
1.c.i. Substitute
43
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 Spring '08
 Staff
 Economics, Macroeconomics, Power of two, Autumn, ECON 401A Autumn

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