ECON 1110 Problem Set 02

ECON 1110 Problem Set 02 - Explain and graphically analyse...

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ECON 1110 Intermediate Macroeconomics Problem Set 2 Spring 2011 When you do these problem sets, you should take some of the questions and try to write longer exam-type answers to the problems. For example, in question 5 rather than just listing the factors, show and explain how they affect output and employment rather than just listing them. (Use the four panel diagrams, etc.) This way you will be better prepared for exams and will be able to write much better answers in the allotted time. Picking one or two questions from each problem set and practicing writing out thorough answers is a very simple way to improve your exam performance! 1. Suppose that there is a technological decline that decreases productivity, such as the loss of engineering knowledge after the fall of the Roman Empire.
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Unformatted text preview: Explain and graphically analyse the effects of this change on employment and output in the classical model. 2. Suppose the production function is Cobb Douglas, such that y=K 0.4 N 0.6 . Calculate the marginal product of labour (MPN). 3. What were the two key tenets of mercantilism? What were the classical economists’ reasons for opposing them? What did the classical economists propose? 4. Suppose the real wage (W/P) doubles for some exogenous reason. Demonstrate the effect on the labour market. What happens to unemployment and output? 5. What factors determine output and employment in the classical model? 6. What factors affect neither output nor employment in the classical model? 7. Explain Say’s law....
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