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Consider the country Spendthriftia, with a depreciation rate ¯d = 0.1, TFP A = 1, labor force L = 100 and saving rate s = 0.1.
The country has the following production function: Yt = AK¯ 1/3 t L 2/3 t .
(a) Find the steady state level of capital in the economy K∗ , output Y ∗ and consumption C ∗ (b) One morning the citizens decide that they need to save more for the future and increase their saving rate to s = 0.25. Find the new values for K∗ , Y ∗ and C ∗
(c) Starting from the first steady state, calculate capital, output and growth rates for the next 25 periods. (Hint: You might find it easier to use a spreadsheet program and the table we constructed in class.) What can you say about the growth rate? How many years does it take for output to close half the gap between the initial and the final steady state?
If the demand for a commodity is elastic, an increase in the price of the commodity. Assume the cross price elasticity of demand for products A and B is positive. Then, the products must be
Maintenance costs on a certain piece of equipment are estimated to be $500, $600, $700, $800, and $900 at the ends of years 1, 2, 3, 4, and 5, respectively. The time value of money rate is 8 percent compounded annually.
What are the twin sins that the natural monopolist will commit that prevents society from realizing the gains?
NonLegal Seafoods (NS) sells its excellent clam chowder in Boston, New York, and Washington. NS has estimated that the demands in these three markets are respectively QB = 10,000 − 1,000PB, QNY = 20,000 − 2,000PNY and QW = 15,000 − 1,500PW, where qua..
The nation of Ectenia has 20 competitive apple orchards, which sell apples at the world price of $2. The following equations describe the production function and the marginal product of labor in each orchard: What is the markets labor demand?
Examine the following variables that could affect the price of oil: Tax credits were offered for expenditures on home insulation. Choose any two of the above variables, and describe how your selections would affect oil prices based on the supply and ..
A company issued 10 year, 7% bonds with a par value of $100,000. The company received $96,526 for the bonds. Using the straight line method, the amount of interest expense for the first semi-annual interest period is:
You are the Economist of the office of Community Development at UCLA. In 2015, you implemented a program of entrepeneurship in LA. Your design was such that the western region was offered that program, while the eastern region was not. Compute the ch..
Discuss specific changes in supply and demand. Examine prior government policies and legislation that exacerbated the impact of the shocks.
Discuss the role of a finance manager in an organization and lists out the remedies of over capitalization?
You are considering adding a new food product to your store for resale. You are certain that, in a month, minimum demand for the product will be 5 units, while maximum demand will be 8 units.
Define the term innovation. Then, research what you think is an example of an innovative product or service. Include the following within your discussion: What is your product, and why do you feel the product you have selected is innovative within ..
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