# Problem Sets and Their Answers - Name(Last name first name...

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Problem Set #1 (Spring 2011) 1/7 Name: _________________________ (Last name, first name) SID: _________________________ GSI: _________________________ Econ 100B Macroeconomic Analysis Professor Steven Wood Spring 2011 Problem Set #1 ANSWERS Due: February 8, 2011 (in class before 3:50:01 p.m.) Turn your completed problem set in to your GSI Please sign the following oath: The answers on this problem set are entirely my own work. I neither copied from the work of others nor allowed others to copy from my work. _______________________________________ Signature Any problem set turned in without a signature will be assigned a grade of zero. Problem Set Instructions 1. You MUST complete your problem set on this template. 2. Graphs and equations MAY be drawn by hand. When drawing diagrams, clearly and accurately label all axis, lines, curves, and equilibrium points. 3. Explanations MUST be word-processed. Your explanations should be succinct and to the point.

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Problem Set #1 (Spring 2011) 2/7 A. Multiple Choice Questions (15 points) . Circle the letter corresponding to the best answer (3 points each). 1. A winter ice storm has paralyzed the entire East Coast, reducing productivity sharply. This supply shock shifts the marginal product of labor curve: a. Increase the demand for labor and increase the real wage. b. Increase the demand for labor but decrease the real wage. c. Decrease the demand for labor and decrease the real wage. d. Decrease the demand for labor but increase the real wage. 2. A sharp decrease in housing prices makes people much less wealthy. If the primary effect of this decreased wealth is felt on labor supply, what happens to the level of employment and the real wage rate if the labor supply function is positively related to the real wage? a. Both employment and the real wage rate would increase. b. Both employment and the real wage rate would decrease. c. Employment would increase and the real wage rate would decrease. d. Employment would decrease and the real wage rate would increase. 3. If consumers suddenly think that a recession is imminent, then the real interest rate would _______ and investment would _______. a. Decrease; decrease. b. Decrease; increase. c. Increase; increase. d. Increase; decrease. 4. Suppose that a large open economy is currently experiencing large net capital outflows. If that country then imposes capital controls that prohibit foreign borrowing and lending by domestic residents this would cause: a. The net export balance to increase. b.
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Problem Sets and Their Answers - Name(Last name first name...

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