The afterward equations characterize a country's bankrupt economy.
Production function: Y = A·K·N - N^2/2
Marginal artefact of labor: MPN = A·K - N.
where the antecedent ethics of A = 10 and K = 8.
The antecedent activity accumulation ambit is accustomed as: N^S = 40 + 9w.
a) (5 points) Acquisition the calm levels of the absolute wage, application and achievement (show work).
Draw two diagrams angular with the activity bazaar on the basal blueprint and the assembly action on the top graph. Be abiding to characterization aggregate including these antecedent calm credibility as point A.
Initial altitude in the appurtenances market
Cd = 1000 + .50(Y-T) - 500r
Id = 600 - 500r
G = 100
Initial altitude in the money market
Md/P = 78 + .5Y - 1000 (r + π^e)
where M = 2400 and π^e = 0.02 (2%)
b) (5 points) Accustomed these antecedent altitude in the appurtenances market, break for an announcement of the IS ambit (r in agreement of Y).
c) (5 points) Accustomed the antecedent output, as in allotment a), what is the appurtenances bazaar allowance absorption rate?
d) (5 points) Accustomed the antecedent achievement as in allotment a) and the appurtenances bazaar allowance absorption amount as in allotment c), what is the accepted calm amount level?
e) (5 points) Please break for an announcement for the LM ambit (r in agreement of Y).
Now draw four abstracted diagrams: (40 credibility total) Top left: a adapted accumulation equals adapted advance (S^d = I^d ), Top right: a FE - IS - LM diagram, Bottom left: a money bazaar diagram, Basal right: An AD - AS diagram, locating this antecedent calm point as point A. BE SURE to LABEL all diagrams absolutely (10 credibility for anniversary accurately fatigued and labeled diagram...each diagram will accept two altered calm credibility A and B)
The activity accumulation changes and is now: NS = 30 + 9w .
K goes up from 8 to 9
f) (5 points) What could account such a change in activity supply? Please accord two specific and able-bodied accurate reasons. Be abiding to absolutely identify/choose one of your (two) affidavit to use as a "relevant" about-face capricious in your graph.
We now accept abundant changes to our bread-and-butter altitude (all is not constant). Think of all these changes accident together, that is, we go from one accompaniment of bread-and-butter diplomacy to a altered accompaniment of bread-and-butter affairs. Below are the changes.
g) (5 points) Accustomed the change in NS and K, echo allotment a) (i.e., acquisition the calm levels of the absolute wage, application and output). Add these after-effects to your activity bazaar and assembly action diagrams appropriately and characterization as point(s) B. Be abiding to characterization the diagram absolutely with the accordant about-face variables in parentheses abutting to the function.
Given the change in activity bazaar altitude / assembly action we accept one alternative change and that is the adapted burning action has afflicted and is now:
Cd = 1440 + .50(Y-T) - 500r
h) (5 points) What could account such a change in the adapted burning function? Please accord two specific and able-bodied accurate reasons. Be abiding to absolutely identify/choose one of your (two) affidavit to use as a "relevant" about-face capricious in your graphs.
i) (5 points) Accustomed this change in adapted consumption, break for a "new" announcement of the IS curve.
j) (5 points) Accustomed the change in adapted burning and the change in Y, break for the new appurtenances bazaar allowance absorption rate.
k) (5 points) Accustomed the change in Y and r, break for the new (if applicable) accepted calm amount akin (we accept that prices acclimatize anon to their accepted calm value)
Please locate this new accepted calm as point B on all your diagrams.
l) (10 points) Using a all-encompassing two aeon burning diagram, show the movement from point A to point B. Please be abiding to be constant and use the aforementioned acumen that you chose in allotment h). Explain absolutely why the adapted burning has afflicted the way it has. Be abiding to characterization your blueprint completely.
m) (5 points) Is the movement from A to B added constant with Classical bread-and-butter approach or Keynesian bread-and-butter theory? Explain.
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