How will the change in employment affect output

Assignment Help Macroeconomics

Reference no: EM133441755

Assignment:

Problem 1: Suppose that a financial crisis hits Econland and reduces the wealth of its households. Assume standard shapes for the production, labor demand, labor supply, saving and investment curves. Further, assume that Econland is a closed economy.

a) Illustrate the effect of the change in S = S(Y1,Y2,W) due to the reduction in wealth on the saving-investment diagram for the market of funds.

b) What will be the resulting change in r and I? Explain.

c) If the fall in household wealth makes workers supply more labor for any given real wage, how will the reduction in wealth affect the equilibrium level of employment?

d) As a result, will the marginal product of labor, MPN, increase or decrease? Explain.

e) How will the change in employment affect output? Illustrate the effects on the labor market diagram and national output diagram.

f) Will the (temporary) change in GDP change S(.) in the same or opposite direction as the initial wealth reduction did?

Now suppose Econland signs a couple of trade agreements and becomes an open economy. The international real interest rate is below Econland's original real interest rate.

g) Is Econland a net lender or net borrower?

h) Illustrate the effect of the change in S(.) due to the reduction in wealth on the saving- investment diagram for the market of funds.

i) Will the current account balance increase or decrease?

Reference no: EM133441755

Questions Cloud

Why would it be important that members of congress live : Why would it be important that members of Congress live in the state in which they are seeking to be elected? In other words, would you find it problematic

What are some examples of economic disturbances : Examples of economic disturbances that could shift Aggregate Supply? Is there anything that can affect the position of the Long Run Aggregate Supply Curve?

Conduct research and locate an organization that demonstrate : Conduct research and locate an organization that demonstrates the characteristics of conscious capitalism and an organization that does not demonstrate

What is the key purpose of developing a hypothesis : What is the key purpose of developing a hypothesis? Discuss your experiences developing the hypothesis for your group project and the processes that you

How will the change in employment affect output : How will the change in employment affect output? Illustrate the effects on the labor market diagram and national output diagram.

How many vaccine visits should each location offer : How many vaccine visits should each location offer? How much extra money would this bring? Would offering vaccine visits compromise the care of regular patients

Explain how warby parker csr strategy has contributed : explain how Warby Parker's CSR strategy has contributed to its success in the marketplace. How are the company's various stakeholder groups affected by its

Why budget surpluses are always followed by recessions : Every time in history that the United States government has had a budget surplus, that has been followed by a recession.

Examining range of issues related to the commercialization : examining the range of issues related to the commercialization of MGH's technologies and help outline the debates surrounding the CSRL office mission

User Account

All Pages