1.2
ANSWERS
1. (c).
Normal good is dened as any good for which demand increases when
income increases and falls when income decreases, keeping prices xed. In
other words, there is a positive income eect.
2. (b).
The production function is concave, with a
1
Exercises Chapter 6
1.1
QUESTIONS
1. How can a business cycle be described using the analysis of this chapter?
2. In Example 6:1; assume that the income endowment y0 and the productivity factor AG = 12 increase during an expansion by 10% instead of
5%:
1
Exercises Chapter 5
1.1
QUESTIONS
1. Assume that a representative agent can allocate current period income to
current period consumption, or to investment that produces next period
consumption, via a production function that depends only on the quantity
1
Exercises Chapter 4
1.1
QUESTIONS
1. If two groups of representative consumers have the same utility function,
depending on goods and leisure, but dierent marginal products of labour,
then
(a) prot maximization determines each group demand for labour;
s
Class Answers (AM1 2012)
1
1.1
Answer Question 1
Sub-question 1:
Utility in the static problem depends positively on each of its arguments,
cd and x.
The logarithmic function helps to capture the desired shape of the utility
function, i.e. its rst-derivat
Degrees of M.A. (Soc.Sci.), M.A., B.Acc., B.Sc. with Honours
Economics
Advanced Macroeconomics 1: Government Debt, Interest and
Economic Growth
In-course Examination
(10:0011:00), (Tuesday 8th November 2011)
Instructions:
Time allowed: 1 hour
Students s
1
Exercises Chapter 7
1.1
QUESTIONS
1. Given a 10% market rate of interest, in equilibrium a representative agent
with a log utility function of current consumption c0 and next period
consumption c1 , and with a positive endowment in the next period and a
About this course
Short description
Advanced Macro 1:
Course Structure
With the ultimate aim of understanding the causes and consequences
of uctuations in macroeconomic activity, this course sets out the
micro-foundations of modern macroeconomic theory by
1
Exercises Chapter 2
1.1
QUESTIONS
1. If goods and leisure are "normal" then
(a) an increase in relative prices causes a decrease in the consumption of
each;
(b) the substitution eect dominates the income eect;
(c) a positive income eect causes consumpti
IMaP 2015 Lectures 1 and 2
Globalisation in the 19th century
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C. Nolan (University of Glasgow)
IMEP Lectures 1 and 2
Week 1 Second Semester
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Lecture 1
Why study the economic h
IMaP 2015 Lectures 3 and 4
Factor prices, migration and two centuries of globalisation
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Week 2 Second Semester
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Lecture
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Globalisation:
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IMEP Lectures 5 and 6
Week 3 Second Semester
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Lecture 5
G
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Capital Flows to LDCs and the Current Account
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Week 4 Second Semester
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Lecture 7
Why doesn ca
IMaP 2015 Lectures 9 and 10
Investment and the current account &
Exchange rates and purchasing power parity
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Week 5 Second Semester
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The Balassa-Samuelson model, UIP and the
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Lecture 13
Introduc
Degrees of M.A. (Soc.Sci.), M.A., B.Acc., B.Sc., LLB with
Honours Economics
Degrees of M.A. (Soc.Sci.), M.A., B.Sc., LLB with
Honours Business Economics
Advanced Macroeconomics
In-course Examination
Instructions:
All students should answer question 1.
Vis
Economics
Advanced Macroeconomics
In-course Examination
Tuesday 03/12/2013
Time allowed: 1-hour for all students (10am-11am) except visiting
students leaving after Term 1 who receive 2-hours (10am-12pm)
Instructions:
All students should answer all parts o
1
Exercises Chapter 10
1.1
QUESTIONS
1. Describe the solution methodology for determining the equilibrium capital
stock in the baseline dynamic zero growth model of Part 4:
2. As a modication to Examples 8:2 and 9:2; let productivity increase by
10% inste
1
Exercises Chapter 1
1.1
QUESTIONS
1. The microfoundations approach to macroeconomics stresses
(a) the representative agent analysis;
(b) relative price analysis;
(c) AD
AS analysis;
(d) more than one of the above.
2. From the general equilibrium economy
1.2
ANSWERS
1. (d).
2. (d).
3. (b).
4. (a).
5. (a).
6. (c).
7. Uncertain. The conclusion is dierent for dierent agent. As shown in Example 4:6, public education changes the structure of the society, ending
up with higher proportion of high productivity ag
1.2
ANSWERS
1. (d).
2. (b).
3. (d).
4. (c).
5. (a).
When the marginal product of capital rises, the total change in equilibrium
can be decomposed into substitution eect and income eect. The substitution eect represents a decrease in current consumption, w
1.2
ANSWERS
1. (b).
The agent will be better o smoothing his or her consumption by borrowing today and lending tomorrow.
2. (c).
The intertemporal budget constraint can be rewritten in terms of c0 :
c1
W = c0 +
) c1 = (1 + r) c0 + W (1 + r)
1+r
Thus, the
1.2
ANSWERS
1. We can solve for the capital stock in two related ways.
First, the AS and AD equations are used to solve for the capital stock.
This is done by setting aggregate output demand to aggregate output supply, so that this gives one equation in t
1.2
ANSWERS
1. As derived in previous chapter, the consumer problem gives two marginal
conditions, i.e. intertemporal and intratemporal conditions. In particular,
the intratemporal condition describes the trade-o between consumption
and leisure within a p
1.2
ANSWERS
1. The consumer problem is:
s
V (kt )
cd
t
xt
=
max
s s
cd ;xt ;lt ;kt+1
t
s
: u cd ; xt + V kt+1 , subject to:
t
s
s
= wt lt + rt kt +
s
s
kt+1 + kt (1
t
k)
s
lt
= T
The one-step maximization problem is obtained by substituting in the two
con
1.2
ANSWERS
1. Hint: During an economic downturn, factor productivity falls. This is
represented by a decrease in the parameter AG in the simple model. However in such a downturn, in our log utility and Cobb-Douglas production
economy, the labor worked do
2
ANSWERS
1. (d).
2. (d).
3. (a).
1
We have c = 1+ yP , so an increase in permanent income yP raises
w t
d
consumption c . (b) and (c) are wrong because Wt = r t Tk + kt and
yP = wt Tt + kt .
4. (a) Business cycles. In the model with human capital, when h
1
Exercises Chapter 3
1.1
QUESTIONS
1. Use comparative statics of the baseline log utility model with Cobb-Douglas
production to explain business cycle changes in employment. Can this be
done using only changes in AG ?
2. How do osetting income and substi
1
Exercises Chapter 9
1.1
QUESTIONS
1. Derive the consumer supply of labor in equation (9:2) by starting with
s
the consumer marginal rate of substitution between goods and leisure,
s
and substituting in the consumer demand for consumption goods from
s
th