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- $40,000 37,000 35,000 0 Du 900 Cars per week (a) Flexible price DH + $37,000 DH D D₂ 0 700 900 1150 Cars per week (b) Fixed price Refer to the above diagrams, one can conclude that if expectations are always fulfilled, Fancy Auto Company: has to adjust both optimal output level and employment accordingly. will never have to adjust the optimal output and employment levels accordingly. has to adjust the optimal output level but not the employment. has to adjust the employment level but not the optimal output.5. Suppose an economy is characterized by the equations below: Price setting: P= (1+ mXW/A) Wage setting: W = A°P° (1 – u) Write down an expression for the equilibrium unemployment rate if P = P but A does not necessarily equal A. Now suppose that expectations of both prices and productivity are accurate. If the markup (m) is equal to 5%, the natural rate of unemployment isQ.Assume that a commercial real estate whose monthly rent is TRY6,000 is to be sold at TRY4,000,000. Inflation rate has been 10% and the nominal interest rate 16% on the average for the last 15 years. The economy has grown at a real rate of 4% over the same period, so have rental revenues. If an investor has adaptive expectations, should he/she buy the real estate or not? Explain why.
- Which one of the following statements about the bargaining power of workers and the nominal wage is INCORRECT? (a) An increase in unemployment benefits may result in an increase in the nominal wage; (b) If workers expect prices to increase, they will bargain for a higher nominal wage; (c) The easier it is to replace a worker, the more bargaining power such workers have; (d) Given that labour is the only production factor used, an increase in the bargained nominal wage will not lead to an increase in the real wage.Please answer both sir I will rate immediately We don't typically see wages fall in response to an economic downturn because: Multiple Choice they are "sticky" and are slow to respond to shifts in the economy. labor supply adjusts so that the market stays at the original equilibrium wage level. the government sets tight regulations on how firms compensate their employees. there is often little change in the labor market in response to economic conditions. Wage stickiness in an economic downturn can result in: Multiple Choice a surplus of labor. a shortage of labor. actual wages that are temporarily above the market-clearing level. cyclical unemploymentThe.... real interest rate will be greater than the .... real interest rate when the .... rate of inflation is ...... than the .... rate of inflation a) actual / expected / ex-post / greater / ex-ante b) ex-post / ex-ante / actual / less / expected c) ex-post / ex-ante / actual / greater / expected d) actual / expected / ex-post / less / ex-ante e) actual / expected / ex-post / more severe / ex-ante
- Suppose the money demand function is = 1000 + 0.2Y - 1000 (r + πe). Required (a.) Calculate velocity if Y = 2000, r = 0.06, and πe = 0.04. (b.) If the money supply (Ms) is 2600, what is the price level? (c.) Now suppose the real interest rate rises to 0.11, but Y and Ms are unchanged. What happens to velocity and the price level? (d.) For part (c.), if the nominal interest rate were to rise from 0.10 to 0.15 over the course of a year, with Y remaining at 2000, what would the inflation rate be?1) Assume that the real wage in an economy is held above equilibrium. a. Graphically illustrate how an increase in demand for labor will change the number of unemployed workers. Be sure to label the axes and the quantities of labor hired before and after the increase in demand . b. Explain in words what happens to the number of unemployed as a result of this change1) Suppose the job separation rate (s) of an economy is 0.01 and the job findings rate (f) is 0.2. The long run unemployment rate (u) is then 4.7%. Suppose the government is implementing a new law that helps unemployed people find jobs sooner. Which of the following is the most likely outcome? a) s increases and u decreases b) s decreases and u increases c) fincreases and u increases d) f increases and u decreases
- 1) Assume that the real wage in an economy is held above equilibrium. a. Graphically illustrate how an increase in demand for labor will change the number of unemployed workers. Be sure to label the axes and the quantities of labor hired before and after the increase in demand. b. Explain in words what happens to the number of unemployed as a result of this change. 2) In an economy, if 5 percent of the employed lose their job every month (s = 0.05) while 15 percent of the unemployed find a job every month (f = 0.15), what is the steady rate (equilibrium rate) of unemployment of the economy?Exercise 3. Consider a money demand function L(i,, Y) = > Pt (i, Y) and M = Mt, where|| Y, denotes output and i denotes the nominal interest rate. Suppose that i = 3% and Y; = 0, 1, 2, . . .. Suppose further that the money supply, M, grows at 1% for t= 0, 1, 2, . . 100 for t || 1. What is the inflation rate in periods t= 1, 2, 3, .. .? Explain. 2. Assuming that agents have perfect foresight, what is the real interest rate for t= 1, 2, . . .?Suppose that the money demand function is (M/ P)^d = 1000-100r where r is the interest rate in percent. The money supply M is 1000 and the price level P is 2. (a) What is the equilibrium interest rate?(b) Assume the price level is xed. What happens to the equilibrium interest rate if the supply of money is raised from 1000 to 1200?