Assignment #5 Answer
Given the utility function U (c, c) and the budget constraint:
c + c / (1 + r) = y + y / (1 + r) t t / (1 + r)
find the expression and sign of the following when maximizing utility:
dc
dt
The first-order conditions in matrix notation

Assignment #7
Given the New Keynesian Model:
C = 102 + 0.7Y
I = 100 100r
G = 50
Md = 124 + 0.25Y 200r
Y = zK0.25N0.75
Ns = 5w + 25
1. Suppose the interest rate target is 12% (r = 0.12). Also assume that P=1, z = 10,
and K = 100. Find the level of output Y

Assignment #6 Answer
Suppose that utility is only a function of leisure in period 1 and period 2. Also
assume that the wage rate is the same in period 1 and period 2. Given the utility
function U (l, l) and the budget constraint:
C = w(h l) + w(h - l) / (

Di Zhu
Assignment #8
Given the efficiency wage function:
e(w) = w4 18w3 + 96w2
What is the optimal wage that the firm should set?
FOC:
e ( w ) /w =3w2-36w+96=0
Thus W*=4 or 8
Second order condition:
2w-12<0 w<6
Therefore, the optimal wage should be $4.

Assignment #3 Answer
Given the profit maximization model: = zF(K,N) rK wN, find the expression and
generate the appropriate sign of
dN
dw
=
1 =
2 =
z F(K, N) rK wN
zFK (K, N) r = 0
zFN (K, N) w = 0
Take the total differential:
zFKKdK + zFKNdN +FKdz dr = 0

Di Zhu
Assignment #10
Consider the following data:
United States
Canada
Argentina
Thailand
Cameroon
z
1.00
0.86
0.45
0.23
0.05
s
0.20
0.25
0.14
0.21
0.10
n
0.010
0.012
0.014
0.015
0.028
Assume that d = 0.075 across all countries.
Given the production func

Assignment #1
1. Given the following model:
Y=C+I+G+X-Z
C = 70 + 0.9Y
I = 90
G = 65
X = 80
Z = 40 + 0.15Y
Find the equilibrium level of income (Y).
Plug each variables C,I,G,X,Z into Y equation,
Then Y=70+0.9Y+90+65+80-40-0.15Y
Solve for Y, Y=1060
2. Give

Assignment #4 - Answer
Given the utility function U (C, l) and budget constraint: C = w (h l) + T, find
the expression and sign of the following when maximizing utility:
dC
dT
Maximize U (C, l)
subject to
C = w (h l) + T
Form the Lagrangian: L = U(C,l) +

Assignment #9 Answer
Suppose you are given the utility function U(C, l) = lnC + 2l, where C =
consumption and l = leisure, and the production function Y = zK 0.4N0.6. Assume
that all output is consumed (Y = C). Find the Pareto-optimal hours of work. In
yo

Assignment #2 - Answer
Find the optimal values of capital (K) and labor (N) when maximizing the
production function:
Q = 10K0.7N0.1
subject to the constraint:
28K + 10N = 4000
Form the Lagrangian function L
L = 10K0.7N0.1 + [ 4000 28K 10N]
(1)
(2)
(3)
LK