Chapter 2
Comparative Advantage
Learning Objectives
1.
2.
3.
4.
Explain and apply the Principle of Comparative
Advantage
Explain and apply the Principle of Increasing
Opportunity Cost (also called the Low-HangingFruit Principle)
Identify factors that shif
Econ 126 - Problem Set 1 - Solution
January 22, 2015
Question 1
See excel spreadsheet for computations. All employment numbers are in thousands.
b) Employment 1989 : 117281
Employment 2007 : 146050
Mean growth : 0.012
c,d,e) The following table presents t
Econ 126 - Problem Set 6 - Solution
March 27, 2015
Question 1
a) The equation stating the evolution of capital is
Kt+1 = (1 )Kt + sF (Kt , Nt ).
At the steady state Kt+1 = Kt Kss so
Kss = (1 )Kss + sF (Kss , Nss ),
Kss = sF (Kss , Nss ).
Plugging in the p
Econ 126 - Problem Set 6 - Solution
February 23, 2015
Question 1
a) The following table compares the models prediction with the observed data. See spreadsheet for
calculations
Year
Model
Observed
Model u
Observed u
1979
1980
1981
1982
1983
1984
1985
13.
Econ 126 - Problem Set 4 - Solution
May 4, 2015
Question 1
The AD curve is defined as the set of (Y, P ) points that are a solution to the following equation set for some
value of i,
Y = C(Y T ) + I(Y, i) + G
M
= Y L(i)
P
Note that in general two equation
Econ 126 - Problem Set 3 - Solution
February 5, 2015
Question 1
a) The set of equations is
IS: Y = C (Y T ) + I (Y, i) + G,
M
LM:
= Y L (i) ,
P
Interest Rule (IR): i = h (Y ) .
Taking total derivatives with respect to T, Y, i and M we have
IS: dY = C 0 (d
Econ 126 - Problem Set 8 - Solution
April 7, 2015
Question 1
For each year the growth rate of technology is given by
gAt =
1
(gY t t gKt (1 t )gN t )
1 t
where gY t = log(Yt ) log(Yt1 ), gKt = log(Kt ) log(Kt1 ) and NY t = log(Nt ) log(Nt1 ). Since gAt is
Econ 126 - Problem Set 10 - Solution
April 13, 2015
Question 1
a) While we typically refer to the changes in productivity we measure using growth accounting as technological change we do not actually mean that it is due only to changes in the methods of p
Econ 126 - Problem Set 5 - Solution
May 4, 2015
Question 1
a) Since in the medium run Y = Yn , which is set by
1 = (1 + m)F
1
Yn
,z ,
N
and since there are no changes in this equation in response to a change in , we have that in the
medium run
dYn
dY
=
=
Chapter 13
Aggregate Demand,
Aggregate Supply, and
Business Cycles
Learning Objectives
1.
2.
3.
4.
Define the aggregate demand curve, explain why
it slopes downward, and explain why it shifts
Define the aggregate supply curve, explain why it
slopes upward
Chapter 7
Economic Growth
Learning Objectives
1.
2.
3.
4.
5.
6.
Show how small differences in growth rates can lead to
large differences in living standards
Explain why GDP per capita is the product of average labor
productivity times the proportion of th
Chapter 1
Thinking Like an Economist
Learning Objectives
1.
2.
3.
4.
Explain and apply the Scarcity Principle
Explain and apply the Cost-Benefit
Principle
Discuss three important pitfalls that occur
when applying the Cost-Benefit Principle
inconsistently
Chapter 3
Supply and Demand
Learning Objectives
1.
2.
3.
4.
Describe how the demand and supply curves
summarize the behavior of buyers and sellers in
the marketplace.
Discuss how the supply and demand curves
interact to determine equilibrium price and
qua
Chapter 4
Spending, Income, and GDP
Learning Objectives
1.
2.
3.
4.
Explain how economists define and measure an
economy's output
Apply the expenditure method for measuring
GDP to analyze economic activity
Define and compute nominal GDP and real
GDP
Discu
Chapter 5
Inflation and the Price Level
Learning Objectives
1.
2.
3.
4.
5.
Explain how the consumer price index (CPI) is
constructed and use it to calculate the inflation rate
Show how the CPI is used to adjust dollar amounts
to eliminate the effects of i
Chapter 6
Wages and Unemployment
Learning Objectives
1.
2.
3.
4.
5.
Discuss the four important trends that have
characterized labor markets in the U.S. since 1960
Apply a supply and demand model to understand
the labor market
Explain how changes in the su
Chapter 9
Money, Prices, and the
Financial System
Learning Objectives
1.
2.
3.
4.
5.
6.
Describe the role of financial intermediaries such as
commercial banks in the financial system
Differentiate between bonds and stocks and show why
their prices are inv
Chapter 8
Saving, Capital Formation, and
Financial Markets
Learning Objectives
1.
2.
3.
4.
5.
Explain the relationship between savings and
wealth
Identify and apply the components of national
saving
Discuss the reasons why people save
Discuss the reasons
Chapter 12
Monetary Policy and the
Federal Reserve
Learning Objectives
1.
2.
3.
4.
Describe the structure and responsibilities of the
Federal Reserve System
Analyze how changes in the federal funds rate
and real interest rate affect planned aggregate
expe
Chapter 11
Spending, Output, and Fiscal
Policy
Learning Objectives
1.
2.
3.
4.
Identify the key assumptions of the basic Keynesian model
and explain how this affects the production decisions made
by firms
Discuss the determinations of planned investment a
Econ 126 - Problem Set 9 - Solution
April 9, 2015
Question 1
a) Substituting the production function into the budget constraint and the budget constraint into the
objective function, as well as the utility function, we arrive at the problem
max log(k0 k1