ECON 401A Hartman Autumn 2010 ANSWERS FOR PROBLEM SET V 1.a. Labor demanded is given by 216NPand output supplied is given by 32YP. 1.b.i. Since ris determined by the world interest rate, the LMrelationship gives Yin terms of Pand the exogenously given values of Mand r; it acts as the ADrelationship in this case. In equilibrium 2P, 64Y, 4r, 44C, 8I, 4Q, and 4NX . 1.b.ii An increase in G(with no change in Tor M) has no effect on Y.1.b.iii. An increase in M(with no change in Gor T) increases Y. 1.c.i. Substitute 43
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