The Natural Rate of
Unemployment and the
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Inflation, and Unemployment
P P e (1 ) F ( u , z )
The above equation is the aggregate supply. This
relation can be rewritten to establish a relation
Exercise List 9
1. Briefly explain how an increase in A affects the aggregate supply curve.
2. The model of aggregate supply and demand indicates that increases in productivity will
always cause the aggregate price level (P) to fall in the short run. Is t
Exercise List 3
1) Are the following statements true, false or uncertain? Explain briefly your answer.
a. If government spending and taxes increase by the same amount, the IS curve does not
b. An increase in government spending leads to a decrease
Exercise List 8
1. Label each of the following statements true, false or uncertain.
a. In steady state, output per worker grows at the rate of population growth.
b. In steady state, output per effective worker grows at the rate of technological
Exercise List 7
1. Consider the production function
Y K N
Compute output when K=49 and N=81.
If both capital and labor double, what happens to output?
Is this production function characterized by constant returns to scale?
Write the p
Exercise List 1
1) Consider an economy that produces only three goods. In the year 2007 the prices of
each good where p1=5, p2=10 and p3=15 and the quantities produced where q1=20, q2=25
and q3=10. In 2008, the prices increased to p1=6, p2=12 and p3=16 re
Exercise List 6
1. For this question, assume that the Phillips curve equation is represented by the
t - t-1 = -.75(ut - un). Given this information, calculate the sacrifice ratio for this
2. Suppose that an economy can be desc
Exercise List 5
1. Assume that the economy starts at the natural level of output. Now suppose there is a
decline in business confidence, so that investment demand falls for any interest rate.
a. In an AS-AD diagram, show what happens to output and the pri
The Labor Market
2 of 39
In Turkey the unemployment rate is
calculated by TUK (Turkish State Institute of
Statistics) from 1988 under the rules set by
ILO (International Labor Organization).
Blanchard chapter 2
The major macroeconomic variables are:
1) Measurement of Output
depression there were no measure of
Middle East Technical University
NCC, Department of Economics
Dr. Pnar Derin-Gre
PROBLEM SET 1
Due Date: Thursday, March 10 , 2016 in class. No late problem sets will be accepted.
Note: Please keep your answers short! In most cas
Exercise List 2
1) So far we have always assumed that the fiscal policy variables G and T are
independent of the level of income. In the real world, however, this is not the case. Taxes
typically depend on the level of income and so tend to be higher when