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Unformatted text preview: Econ 154b Yale University Spring 2005 Prof. Tony Smith HOMEWORK #6 This homework assignment is due at the beginning of lecture on Monday, March 28. 1. Do numerical problem #4 on p. 388 in Chapter 10 of the textbook. 2. (a) Suppose that the discovery of a new technology increases the expected future marginal product of capital, but does not affect current productivity. Explain how and why this new technology shifts the IS curve. (b) Use the classical IS- LM model to determine the effects of the new technology on current output, the real interest rate, employment, the real wage, consumption, investment, and the price level. To keep things simple, suppose that expected future wages and future income are unaffected by the new technology. (c) Explain how and why the discovery of the new technology shifts the AD curve. (d) Use the misperceptions version of the AD- AS model to determine the short- run effects of the new technology on current output and the price level (that is, keep the expected price...
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- Spring '07