Using the (graphical) two-period model for a nonrenewable resource, analyze the effects of the following on equilibrium prices and quantities in the market for that resource: An increase in the interest rate Choose all that apply P, - MEC P, - MEC 1+r 9 1. 01 increases, Q2 Decreases 2. P1 and P2 fall O 3. 01 decreases, Q2 increases 4. O 4. P1 increases, P2 decreases UESTION 7 Using the (graphical) two-period model for a nonrenewable resource, analyze the effects of the following on equilibrium prices and quantit in the market for that resource: An increase in second-period population Choose all that apply P, - MEC P, - MEC 1+r Q Q. - 1. 01 decreases, P1 increases O 2. 02 increases, P2 increases O 3. 01 increases, P1 decreases O 4. 02 decreases, P2 increases
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- 5. Consider a representative household in the static consumption-leisure model with prefer- ences given by u(c, 1) = Ac¹/² +1¹/2. The household has a unit time endowment given by 1 = 1+n, faces a price of P on consumption, and earns nominal wages at rate W on their labor supply, n. In addition, the household faces a proportional tax on wage income of T. (a) Interpret in words the economic significance of the exogenous parameter A. (b) Interpret in words the economic significance the unitary time endowment.Consider a dynamic (two-period) macroeconomic model with a representative household, a representative firm, and a government. The representative household makes consumption- saving and labor supply decisions. The representative firm makes labor demand and invest- ment decisions. (a) Clearly write down the representative consumer's problem and the necessary assump- tions. (b) Clearly write down the representative firm's problem and the necessary assumptions. (c) Clearly definite the competitive equilibrium for this economy. (d) Derive (graphically) the output demand curve. State the necessary assumption(s).Determine the equilibrium income and interest rate given the following information about the commodity market : C= 0.8Y + 60 I=- 3or + 740 and money market Ms - 400 L,- 0.2Y Lg= -20r + 200 Oa. Y= 2950, r8% O b. Y= sooo, r=5% Oc. Y= 2200, re12% o d. Y= 2950, r6%
- Explain the relationship that economic variables can have with businesscycles. These have both direction and timing. Give an example economicvariable of each combination of direction timing. Of these two attributes, ifyou had exclusive access to a reliable variable, which relationships wouldyou want this variable to have for forecasting purposesAsapConsider the following actual and forecast demandlevels for Big Mac hamburgers at a local McDonald’s restaurant:DAY ACTUAL DEMAND FORECAST DEMANDMonday 88 88Tuesday 72 88Wednesday 68 84Thursday 48 80FridayThe forecast for Monday was derived by observing Monday’sdemand level and setting Monday’s forecast level equal to this demand level. Subsequent forecasts were derived by using expo-nential smoothing with a smoothing constant of 0.25. Using this exponential smoothing method, what is the forecast for Big Macdemand for Friday?
- Part (a):Suppose that the demand for the Dates and supply of the Dates in Ramadan both are declined byequal amount over some period of time. What you can conclude with this information? Explainand graphically show the effect on equilibrium price and equilibrium quantity.Part (b):Why is money not considered to be a capital resource in economics and why is entrepreneurialability considered to be a part of economic resource, distinct from labor? Please suggest two mostimportant function of entrepreneurs, you think is must?1. What is a market-clearing model? When is it appropriate to assume that market clear? 2. Use the model of supply and demand to explain how fall in the price of frozen yogurt would affect the price of ice cream and the quantity of ice cream sold. In your explanation, identify the exogenous and endogenous variables. 3. Consider an economy that produces and consumes hot dogs and hamburgers. In the following table are data for two different years. Goods Hot dogs Hamburgers Quantity (2010) 200 200 Price (2010) $2 $3 Quantity (2020) 250 250 Price (2020) $4 $4 Using 2010 data as the base year Compute the following statistics for each year. Nominal GDP, Real GDP, GDP Deflator, Inflation rate using GDP deflator, CPI, Inflation rate using CPI. (Hint: i) to calculate CPI use base year fixed quantity Hot dogs 200 and Hamburgers 200, ii) To calculate inflation rate, use percentage change in price level between two years.)10. Suppose in our model, lifespans increased due to a productivity in- crease. What would likely happen to hours worked and leisure over the lifetime of a represent ative consumer. (a) Let's consider one of two common ways of implementing this change. Suppose the increase raised both lifespans and the amount of years consumers are healthy enough to work by the same amount, how would that likely affect the measured numbered of hours work by prime aged adults within a given year? What would likely hap- pen to the retirement age? (b) Let's consider the other way to implement it. Suppose the change in lifetimes came about changes in technology that delayed death but did not extend the amount of years consumers are healthy enough to work. What would likely happen to hours worked within a year? What would happen to the retirement age? (c) In the US, the generalized stylized fact is that the actual age of retirement is not increasing. Nor are hours worked per week. Why are both of the above…
- ) Consider the following closed economy SImodel set upY = 18000C = 300 + 0.8(Y − 2500)I = 3500 − 400(r)G = 3000T = 2500(a) Compute the impact on r and I, if Gincreases by 500.(b) Compute the impact on r and I, if Gincreases by 500.(c) Compute the impact on r and I, if bothG and T increase by 500.ADVANCED MACROECONOMICS: MODERN MACROECONOMICS MODEL It is known that the maximization of the household utility function is as follows: U₁ = fety InC₁ + (1 − y) ln(L – 1,)]dt Withconstraint : K₁ = (R₂ - S)K + Welt - Ct (2) The firm produces output through the production function (Yt = F(Kt. Lt. At)) Cobb Douglas constant return to scale with the aim of maximizing profit. It is assumed that the economy is a closed economy. A. Derive the labor supply equation. Explain how the relationship between increased household preferences for (i) consumption and (ii) leisure time on labor supply. B. Derive the labor demand equation. Explain how the relationship between (i) wages and (ii) capital to labor demand. C. Determine the amount of labor (level of labor) from the above economy in steady2. Bart lives for two periods: young and old. He can supply labor when he's young, earning $1 per hour. His utility function is given by u (c1,l1, c2) = log c1 – 0l7 + B log c2 where c is consumption at period t, 1 is the labor supplied, ß = , € (0,1) is the time discount factor, and p is time preference. There is an asset market that individuals can save and borrow at interest rate (1+r). (a) Solve for the optimization problem (cj, cž, l4) of Bart. (b) Suppose that the government imposes capital and labor income taxes, TK and TL. Define the life-time budget constraint of Bart with taxes. (c) Solve for the optimization problem with taxes. Does your answer differ from part (a)? Explain.