Unformatted text preview: d. Suppose the price of bread increased to $2 per loaf. How many workers will the bakery hire if the nominal wage rate is $8? How many workers will the bakery hire if the nominal wage rate is $16? 3. a. Mankiw, Chapter 3, Problems and Applications, Question 7 on page 77. (Question 7 on P. 74 of 6 th Edition, Question 4 on page 70 of the 5 th Edition.). b. Using the long run model of the economy developed in chapter 3, graphically illustrate the impact of the tax increase discussed in part A. Be sure to label: (a) the axes; (b) the curves; (c) the initial equilibrium values; (d) the direction of curve shifts; and (e) the terminal values. c. State in words what happens to: (a) the real interest rate; (b) investment; (c) consumption; and (d) output. 4. Mankiw, Chapter 3, Problems and Applications, Question 1 on page 76. (Question 1 on P. 73 of 6 th Edition, Question 6 on page 69 of the 5 th Edition.)....
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This note was uploaded on 12/04/2011 for the course ECON 305 taught by Professor Terrell during the Spring '08 term at Maryland.
 Spring '08
 Terrell
 Economics

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