Macroeconomic Theory
ECON 2220B
Spring 2014
Solutions to Problem Set 3
March 9, 2014
1
The Fundamental Determinants of Long-Run Living Standards
Country A has a capital-labor ratio that is initially twice as big as that of country B, but neither is yet in

Macroeconomic Theory
ECON 2220B
Spring 2014
Solutions to Problem Set 2
February 7, 2014
1
Labor market I
How would each of the following aect the current level of full-employment output? Explain.
a. A large number of immigrants enter the country.
b. Energ

Macroeconomic Theory
ECON 2220B
Spring 2014
Solution to Problem Set 6 (MC Exercise)
May 4, 2014
1. A temporary increase in government purchases in the classical model would
(a) shift the production function to the right.
(b) shift the marginal product of

Macroeconomic Theory
ECON 2220B
Spring 2014
Solution to Problem Set 5 (MC Exercise)
April 30, 2014
1. An economic variable that moves in the same direction as aggregate economic activity (up in expansions, down in contractions) is called
(a) procyclical.

Macroeconomic Theory
ECON 2220B
Spring 2014
Solution to Problem Set 4 (MC Exercise)
April 20, 2014
1. For something to satisfy the medium-of-exchange function of money, it must be
(a) backed by gold.
(b) readily exchangeable for other goods.
(c) issued by

Macroeconomic Theory
ECON 2220B
Spring 2014
Solution to Problem Set 3 (MC Exercise)
April 18, 2014
1. Suppose the current level of output is 5000 and the elasticity of output with respect to capital is 0.4.
A 10% increase in capital would increase the cur

Macroeconomic Theory
ECON 2220B
Spring 2014
Solution to Problem Set 2 (MC Exercise)
March 11, 2014
1. If Y = A N (75 + K/N ), where K = 1000, N = 20, and A = 10, what happens if K doubles and
N doubles?
(a) Y is unchanged.
(b) Y increases by 50%.
(c) Y do

Macroeconomic Theory
ECON 2220B
Spring 2014
Solution to Problem Set 1
February 7, 2014
1
National Income Accounting 1
Are the following statements true or false? Explain your answers carefully.
1. If a country employs many foreign workers, GNP is likely t

Macroeconomic Theory
ECON 2220B
Spring 2014
Solution to Problem Set 1(MC Exercise)
March 11, 2014
1. The value of a producers output minus the value of the inputs it purchases from other producers is
called the producers
(a) surplus.
(b) prot.
(c) value a

Macroeconomic Theory
ECON 2220B
Spring 2014
Problem Set 6
April 27, 2014
DUE: 9 am, Wednesday, May 7, 2014. Please submit your hardcopy of hand-written solutions to Martin
Wus mailbox (No. A68) on 9/F KKL Building. Late problem sets will not be accepted.

Macroeconomic Theory
ECON 2220B
Spring 2014
Problem Set 5
April 14, 2014
DUE: 9 am, Wednesday, April 23, 2014. Please submit your hardcopy of hand-written solutions to
Martin Wus mailbox (No. A68) on 9/F KKL Building. Late problem sets will not be accepte

1. Use the IS-LM model to determine the effects of each of the following on the
general equilibrium values of the real wage, employment, output, the real interest rate,
consumption, investment, and the price level.
a. A reduction in the effective tax rate

Macroeconomic Theory
ECON 2220B
Spring 2014
Problem Set 3
March 9, 2014
DUE: 9 am, Wednesday, March 26, 2014. Please submit your hardcopy of hand-written solutions to
Martin Wus mailbox (No. A68) on 9/F KKL Building. Late problem sets will not be accepted

Macroeconomic Theory
ECON 2220B
Spring 2014
Solutions to Problem Set 6
April 21, 2014
1
Permanent Increase in Government Purchases
Use the classical IS LM model to analyze the eects of a permanent increase in government purchases
of 100 per year (in real

Macroeconomic Theory
ECON 2220B
Spring 2014
Problem Set 4
March 12, 2014
DUE: 9 am, Wednesday, April 9, 2014. Please submit your hardcopy of hand-written solutions to
Martin Wus mailbox (No. A68) on 9/F KKL Building. Late problem sets will not be accepted

Macroeconomic Theory
ECON 2220B
Spring 2014
Problem Set 2
February 7, 2014
DUE: 9 am, Wednesday, March 12, 2014. Please submit your hardcopy of hand-written solutions to
Martin Wus mailbox (No. A68) on 9/F KKL Building. Late problem sets will not be accep

Macroeconomic Theory
ECON 2220B
Spring 2014
Problem Set 1
February 7, 2014
DUE: 9 am, Wednesday, February 26, 2014. Please submit your hardcopy of hand-written solutions
to my mailbox (No. A68) on 9/F KKL Building. Late problem sets will not be accepted.

Macroeconomic Theory
ECON 2220B
Spring 2014
Solutions to Problem Set 5
April 14, 2014
1
IS-LM model
ABC, 8th edition: Numerical Problem 5, Page 381
Solution:
The IS curve is found by setting desired saving equal to desired investment. Desired saving is S

Macroeconomic Analysis
ECON 6022 B
Fall 2011
Solution to Problem Set 3
November 2, 2011
1
A change in consumption preference in the general equilibrium
real business cycle model
Q3, Chapter 8, Macroeconomics: A modern approach, Robert Barro, Page 199.
Sol

ECON 6022B
Problem Set 2
Suggested Solutions
Fall 2011
September 27, 2011
1
Optimal Consumption with A Linear Utility Function (Optional)
Similar to the example in Lecture 3, the household lives for two periods and the life time utility function is
linear

Chapter 9
The IS-LM/AD-AS Model: A General
Framework for Macroeconomic Analysis
T Multiple Choice Questions
1.
The FE line shows the level of output at which the _ market is in equilibrium.
(a) Goods
(b) Asset
(c) Labor
(d) Money
Answer: C
Level of diffic