tutorial7solutions - EC2102 Macroeconomic Analysis I...

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EC 2102 Macroeconomic Analysis I Tutorial 7 , Week 11, March 28-April 1, 2011 Question 1 ( a ) y and x are positively correlated. See &gure 1 ( b ) y is a lagging variable w.r.t. x . See &gure 2 ( c ) x and y exhibit persistence. Question 2 Depending on exactly how you count the recessions and booms, you get a di/erent answer. Any answer that is coherent will be accepted. Question 3 Question 3 ( i ) Suppose there is a persistent increase in current and all future TFP , so z 1 % ; z 2 % ; z 3 % ; z 4 % , :::; (see ±&gure 12.2²of your lecture notes) An increase in z 1 means % in MPL so N d 1 shifts right to e N d 1 ; because more labour is demanded at every wage rate. But increases in future also imply that wages in the future % , so lifetime wealth % , and you choose to work less at every wage rate, so N S 1 ( r & 1 ) shifts to the left to b N S 1 ( r & 1 ) : It turns out that the leftward shift of labour supply curve today is smaller than the righward shift of labour demand curve, so overall current employment rises in the labour market. That the leftward shift of labour supply curve is smaller than the rightward shift of labour demand can be thought to be due to the the latter being the direct result of z 1 changing, which happens in
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This note was uploaded on 01/18/2012 for the course ECONOMICS 2102 taught by Professor Tan during the Spring '11 term at National University of Singapore.

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tutorial7solutions - EC2102 Macroeconomic Analysis I...

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