Question 1

Given the production function Y = AKαL1-α, if the rental price of capital is 0.133, Y = 690, and K = 1,728, what is the value of the exponent α? If A = 1, and the real wage is 1.15, is this economy in a long-run equilibrium?

Accepted Answer

The answer of Given the production function Y = AKαL1-α,...

Question 2

Suppose a government tried to mandate a real wage above the equilibrium real wage. Assuming that factor markets are otherwise free and competitive, explain why the higher real wage would fail to increase the share of labor income in national income.

Accepted Answer

The answer of Suppose a government tried to mandate a...

Question 3

Suppose that reduced barriers to international financial transactions cause an increase in the economy's supply of capital. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

Accepted Answer

The answer of Suppose that reduced barriers to international financial...

Question 4

Suppose that a technological advance raises total factor productivity. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

Accepted Answer

The answer of Suppose that a technological advance raises total...

Question 5

Consider an economy in which 350 = 3 × 7000.3L0.7. Calculate the long-run equilibrium values of factor prices and incomes.

Accepted Answer

The answer of Consider an economy in which 350 =...

Quiz 3: Aggregate Production and Productivity

Given the production function Y = AKαL1-α, if the rental price of capital is 0.133, Y = 690, and K = 1,728, what is the value of the exponent α? If A = 1, and the real wage is 1.15, is this economy in a long-run equilibrium?

Suppose a government tried to mandate a real wage above the equilibrium real wage. Assuming that factor markets are otherwise free and competitive, explain why the higher real wage would fail to increase the share of labor income in national income.

Suppose that reduced barriers to international financial transactions cause an increase in the economy's supply of capital. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

Suppose that a technological advance raises total factor productivity. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

Consider an economy in which 350 = 3 × 7000.3L0.7. Calculate the long-run equilibrium values of factor prices and incomes.