A decrease in total factor productivity in the one-period model with lump-sum taxes, reduces consumption, increases output and reduces the real wage. reduces consumption, increases output, and increases the real wage. reduces consumption, reduces output, and reduces the real wage. increases consumption, increases output, and increases the real wage.

Consider a two-period model in which the goverment introduces a tax on interest earnings. This means that borrowers pay a net interest rate of r, however lenders (savers) receive a net interest rate of (1 – t)r on their savings, where t is the tax rate withheld by the government and is a multiplication sign. Let r = 8 percent and t = 28 percent. Consider a consumer who is a saver. Answer parts a), b), c) and d) below. Round your numerical answer in part a) to 3 decimal places. a). The relative price of consumption today to consumption tomorrow for this saver is b). Suppose the tax rate increases. How does the saver's relative price of consumption today change? A. Consumption today has the same price relative to consumption tomorrow. B. Consumption today becomes relatively more expensive C. Consumption today becomes relatively cheaper c). As a result, the substitution effect shows that A. Consumption today increases, while consumption tomorrow decreases B. Consumption today remains…

Suppose country A has the following system of taxes/transfers: ANAL (a) Income 200: Taxed at 40%. In this country, we assume that everyone receives 5 per hour as wages. A worker chooses how many hours she wants to work. Her preferences over aggregate consumption, c, and 41 abor, I, are represented by the following utility function U(c, 1) =c+0ln(31-1) where 0 is a parameter reflecting drudgery of work (i.e. how painful the work is). Assuming 0 = 60 for the worker and given the system of axes/transfers, what is her optimal choice of labor? A 1=21 B 1 20 C 1* = 19 D 1*=22 48 55

Consider the following​ one-period model. Consumer Utility function over consumption​ (C) and leisure​ (L) ​ U(C,L)= C^(1/2)L^(1/2) = Total​ hours: H​ = 40 Labour​ hours: ​= H​ – L ​Non-labour income:​ π ​Lump-sum tax: T Hourly​ wage: w Firm Production​ function: Y​ = ​zF(​) ​= z Total factor​ productivitiy: z​ = 2 Government Government spending​ (exogenous): G​ = 20 Suppose that the total factor​ productivity, z, increases to 5. What is the substitution effect of this wage change on labour ​supply(​)? A. ​+8.51 B. ​-5.51 C. ​-8.51 D. ​+5.51 E. None of the above

Output in Winston-Salem is produced using labor, L, and capital, K. Initially there is a fixed amount of capital, K0, and a fixed amount of money. All residents of Hickory only uses this form of money for all their transactions.  A large thunderstorm floods Winston-Salem. The flood destroys 20 percent of all capital but does not injure or kill anyone. What happens to real wages and output, respectively?       Increase, decrease       none of the answers are correct     Decrease, unchanged     Increase, uncertain     Increase, increase

Exhibit 12-4 Price level Potential output SRAS increase taxes AD Real GDP If the government wants the economy illustrated in Exhibit 12-4 to be at full employment, it should decrease transfer payments decrease government purchases wait for the SRAS curve to shift to the left do none of the above

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he Fisher effect implies that lenders set a nominal interest following the general relationship i= E[π] + rmkt, where i is the nominal interest rate, and r is the competitively determined rate of return.  Which best describes redistribution between borrowers and lenders if inflation unexpectedly rises?   a. The nominal interest rate, i, from a loan will be too low and the real rate of return will increase. b. The nominal interest rate, i, from a loan will be too low and the real rate of return will decrease. c. The nominal rate set at the time of loan agreements will be too high, and the real rate of return will decrease. d. The Fisher effect is based entirely on perfect information for inflation, ie E[π] = π. e. None of the above