chandioking352

The ________ suggests that when real GDP equals potential GDP, quantity of money increases and brings equal percentage in the price level.

velocity of circulation, equation of exchange or quantity theory of money

The quantity of moneyThe quantity of money is $ 2 billion andthe velocity of circulation the velocity of circulation is 33 .What is GDP

Problem I

Real GDP 300 MILLIONS OF Dollars quantity of money was $60 million and the velocity of circulation of money was 10 . In 2012, the price level rose by 10 percent.

1. What was the price level in 2011?
2. What was the real GDP in 2012?
3. What was the velocity of circulation in 2012?
4. What was the quantity of money in 2012?

1. Many demographers predict that the United States will have zero annual population growth in the 21st century, in contrast to one percent annual population growth that occurred in the 20th century. Use the Solow Model (without technological advancement) to predict the effect of this slowdown in population growth on the steady state:

a) level of output per person

b) economic growth rate

2. Assume no technological progress. Draw the Solow Growth Model. This should include (in per-worker terms), the production function, the savings (i.e., investment) function, and break-even investment function. Label everything appropriately

a) Label the steady-state levels of capital per worker and output per worker as k*₀ and y*₀, respectively

b) Suppose population growth increases. Show this change on your graph. Label the new steady-state levels of capital per worker and output per worker as k*₁ and y*₁ , respectively

c) Explain what happens to the economic growth rate g_Y in the transition from y*₀ to y*₁ (i.e., is it negative, zero, or positive and why?)

d) Explain what happens to the economic growth rate g_Y at y₁* (i.e., is it negative, zero, or positive and why?)

3. In this model, we incorporate population growth and labor- augmenting technological progress.

Y = F (K, LE) Answer the following:

a) What does E represent? What does g represent?

b) What does k represent? What does y represent?

c) Write the central dynamical equation of the Solow model. Briefly explain what it describes.

d) What is the equation that defines the steady-state level of capital per effective worker? (i.e., how would you determine k*?)

e) How would you determine the steady-state level of output per effective worker? (i.e., how would you determine y*?)

4. Draw the Solow Growth Model including population growth and technological grown. This should include (in per effective- worker terms): the production function, the investment function, and break- even investment function. Label everything appropriately. Label the steady-state level of capital per effective worker and output per effective worker as k* and y*, respectively

INTERMEDIATE MACROECONOMICS: SOLOW GROWTH MODEL

Hello. I have already made a graph, but I am confused by parts (d) and (e). Thanks for your help! Here is the problem:

Assume no technological progress. Draw the Solow Growth Model. This should include (in per-worker terms), the production function, the savings (i.e., investment) function, and break-even investment function. Label everything appropriately.

a. Label the steady-state levels of capital per worker and output per worker as k*₀ and y*₀, respectively. .

b. Suppose population growth increases. Show this change on your graph. Label the new steady-state levels of capital per worker and output per worker as k*₁and y*₁, respectively.

c. Explain what happens to the economic growth rate g_Y in the transition from y*₀ to y*₁. (i.e., is negative, zero, or positive and why?)

d. Explain what happens to the economic growth rate g_Y at y*₁. (i.e., is negative, zero, or positive and why?)

1. For the following, assuming that there is no population growth or technological progress.

a) What is the equation that defines the steady-state level of capital per worker?

b) How would you determine the steady state level or output per worker (i.e., real GDP per capita) from (a).

c) Explain, in words, how an economy that starts with too much capita per worker gets to its steady state.

2.Suppose the following represents the economy:

Y = F(K,L)=√ KL

s = 0.3

δ = 0.1

k0 = 4
a) Write out the per-worker production function.

b) Illustrate the per-worker production function, the investment function, and the depreciation function on the appropriately labeled graph.

c) Fill in the following table for years (1) to (4). See the note below about the economic growth rate g_y.

Note: Economic growth is

gY = Yt − Yt−1 / Yt−1

Since, in this model there is no population change, this is the same as

gY = (Yt /L − Yt−1/L) / (Yt−1/L)

= yt − yt−1/ yt−1 = gy

d) What do you notice happens to economic growth, gy, as k becomes larger? Why does this happen?

e) Suppose that the steady-state occurs in year “SS” above. Calculate the steady-state level of capital per worker, and fill in the remaining rows, (SS) to (SS+2).

f) What do you notice happens to economic growth, gy, once steady state is reached (and beyond the steady state)? Why does this happen?

Exercise 2.1 Production Model
Assume that production Yt is given as a function of TFP A, labor Lt and capital Kt by:
Yt = AK_t^1/3 L_t^2/3

1. Express output per capita yt = Yt/Lt, as a function of A and kt = Kt/Lt.
Download the data from the Penn World Tables, Version 8.1: http://www.rug.
nl/research/ggdc/data/pwt/pwt-8.1. Under "Expert Data Access", click on
"Excel format". Then import this Excel Workbook pwt81.xlsx into Google Sheets
directly, or just copy paste all cells from sheet "Data" to a new blank sheet in Google
Sheets. (it may take a while, given the size of the dataset) Use the "Filter" option
on Google Sheets to keep the data only for year 2009. Then Copy and paste on a
new Sheet the following series: rgdpo, rkna, pop. Use Sheet "Legend" in Workbook
pwt81.xlsx to see what this data corresponds to. Then do the following:
2. Draw a map of real capital/capita stock across countries (using constant 2005$).
To do that, select your two data columns (one with country names, the other with
capital/capita stocks that you will have created computing rkna/pop) and click on
the "Insert chart" icon. Choose, in "Chart types", the first Map option. You can
change the colors if you do not find them particularly informative. (with "advanced
edit option")
3. Use the same method to draw a map of real output/capita (given by rgdpo/pop).

2. Kazakhstan is well endowed with energy resources, although its resources in per capita terms is much lower than Kuwait. Its estimated oil reserve per capita is 5% of the level in Kuwait, and its estimate gas reserve per capita is 23% of the level in Kuwait. Tables 2 and 3 and Figures 1 and 2 summarize the economies of Kazakhstan and Kuwait from 1992 to 2011 (data sources: Penn World Table and US Energy Information Administration). The sample period starts from 1992 such that it does not include the years of the First Gulf War which involved Kuwait. The variables y,k,h, and A are real output per worker (in 2005 US dollar), real capital per worker (in 2005 US dollar), human capital index, and TFP. The TFP is calculated from the production function y = Ak1/3h2/3. The variables gy,gk,gh and gA are their growth rates. The Brent crude oil price is one of the major measures of crude oil price in the US dollar. For all of the following questions, please use theory or data to explain your answers. These questions may not have definite answers and you will be graded on the logic and quality of your 1 answers. (a) (6 points) Based on the prediction of the Solow model, which country should have higher growth rate in GDP per worker between 1992 and 2011? (b) (6 points) Based on the data presented here, do you think the TFP series accurately measure productivity in the two countries? (c) (12 points) Comparing the economic performance of Kazakhstan to Kuwait, do you think there is evidence that Kazakhstan suffers from the natural resource curse?

Expected Spot Rates. Suppose the spot exchange rate for the Kuwait dinar is KWD271. Interest rates in Australia are 4% per year. They are triple that in Kuwait. What do you predict the exchange rate will be in one year? In two years? In five years? What relationship are you using?

During a shopping spree in China , C. Dundee has bought a Sony CD boom box (with woofers and tweeters) for CY 2,000, jade jewelry for CY 4,000, and four custom-made suits for CY 25,000. The spot exchange rate is CY/AUD= 5.

(a) If PPP held, what should the same boom box, jewelry, and suits cost in Australia?

 (b) Suppose Mr Dundee is (unexpectedly) stopped at customs as he arrives in Melbourne, and must pay import duties of 20 percent. If the same boom box, jewelry, and suits cost AUD 450, AUD 1,500, and AUD 8,000 in Australia, respectively, was his shopping spree worth at least the HKD 10,000 paid for airfare and hotels during his trip?

Suppose that, for perfectly competitive firm of marginal cost function is given by:

MC = Q

2

-2Q+20, then

A. Find the equilibrium level of output, if price per unit of a good produced is birr 44.

B. Find total amount of MC, Total Cost and Total revenue

C. Find maximum amount of profit

D. Find minimum price that required by the firm to stay in the market

Explain why a feather falls at the same rate as a hammer on the moon

A ball is thrown vertically upward with a velocity of . Two seconds later a second ball is thrown vertically upward with a velocity of . At what point above the ground will they meet?