Understanding GDP, Labor Markets, and Aggregate Supply
Assistantship Economics I
(Solemn III)
1. The value of the following transactions, should be included or not as part of GDP and why?
A) A tourist pays a meal in a restaurant
Yes, because it is a purchase (or demand) for a final good produced in the country
B) A company buys an old building
It was because the GDP accounted for another year, we only consider the final goods produced in the country during the year.
C) A supplier sells chips to a computer company that makes personal computers
Not because the chip is not a final but an intermediate good used to produce a final good, therefore, whether it be telling were counted twice, to be it (the chip) incorporated into the price of good final (personal computers).
D) A consumer buys a car from a dealer
Depends what kind of car is
2. Suppose that, due to better training, workers become more productive
A) What effect does this have on labor demand?
More productive workers, is synonymous with an increase in the marginal productivity of labor, the above translates into an increase in labor demand.
B)What effect does this have on the
The increase in labor demand curve shifts to the right as against a fixed labor supply increases the equilibrium real wage.
C) What are the effects on total employment in this economy?
In this case, the increase in demand causes an increase in real wages and hiring all employees, so the total Empe increases.
D) Change involuntary unemployment? Depends on what form your answer that the real wage is flexible or not?
In this case, real wages increased and also increased the recruitment of Preson. Not pregnant, because the wages are now higher, it is likely that some of the people who were not working bucando now due to high wages for their interest (leisure has become more expensive in relative terms with the work) and therefore also changes the percentage of involuntary unemployment.
Sinnajuste prices, the above analysis is not supported
3. In the Republic of Atlantis, the real wage is fixed above its equilibrium level
A) Are there any involuntary unemployment?
When the price is fixed above the equilibrium price. It generates an excess supply because a higher price of real wages there is a greater number of people in the labor market offers. In the lawsuit on the contrary, at a higher price will demand fewer workers. This generates unemployment (chart page. 71).
b) Suppose that workers in a neighboring country migrate to Atlantis. What about Atlantis total employment, output and involuntary unemployment?
In this case there is a considerable increase in labor supply or labor shifts the supply curve, for wages that do not comply (not flexible), the price of the real wage does not change, no increased demand and therefore a larger labor supply compared to the same demand no changes in recruitment: involuntary unemployment rises, total employment, production Remain the same.
C) How does the answer in b, if wages were flexible in Atlantis?
In the event that there is price flexibility, an increase in labor supply should lead to a fall of real alario, leading to an increase in contract workers. THEREFORE: it increases total employment of workers, increases the product, involuntary unemployment is uncertain effect depends on what effect is greater, because when wages fall there is also a group of people who are no longer willing to work for that wage .
4. Consider the case with the aggregate supply curve (assuming that the labor market is flexible in setting wages) in the following situations:
A) There is a technological breakthrough
Unavance technology translates into increased productivity. With the same number of factors can produce more, thus increasing aggregate supply.
B) An earthquake destroys half the country’s capital stock
Faced with a decline in capital stock, the marginal productivity of labor falls, labor demand decreases, prices fall and decreases wage employment recruitment. Decreases aggregate supply.
C) They change the preferences of workers are now willing to work harder at any given wage
The hiring of workers at a lower price, lower production costs, falling costs of production factors increases aggregate supply.
D) invent better machines, more productive, but only a third of the workforce know how to operate them
Depends if the increased productivity of machines able to overcome the fact that only one third of the workforce is able to operate.
5. Explain why the aggregate demand curve is downward sloping in both a closed economy as open. What is the importance of real balances in the slope of the aggregate demancda?
The aggregate demand curve is downward sloping in both closed and open economy, because before changing prices, it reacts in the opposite direction. Real balances are related to demand and when prices increase, real balances will fall, hence consumption, which as a component of aggregate demand leads to a fall in demand.
6. Consider what happens to the Keynesian aggregate supply in the following situations:
A) There is a technological breakthrough
B) An earthquake destroys half the country’s capital stock
C) They change the preferences of workers are now willing to work harder at any given wage
D) invent better machines, more productive, but only a third of the workforce know how to operate them
In this case the analysis for the development of the questions is similar to question 4, but in this case there is no flexibility with respect to the price of real wages.
7. During the Great Depression of the 1930s, the United States suffered deflation and a significant increase in involuntary unemployment. What cases do you aggregate supply that is more relevant to analyze this situation? Some people recommended that the government reduce its spending. Do you think this was a sound recommendation under the model of supply / aggregate demand?
When there are factors that reflect the economic stagnation and deflation and rising unemployment, it is important for implementing economic recovery. In the case of a reduction in public spending contracting further aggregate demand, which is not conducive to activation. It is therefore advisable to establish policies to expand public spending.
8. Classify the following variables according to their properties in the business cycle (procyclical, countercyclical aicíclica): consumption, investment, output, employment, real wages, real money balances, money supply, nominal interest rate, rotation of deposits . Explain.
Procyclical: Consumption, investment, productivity, employment (formal)
Countercyclical: Employment (informal), nominal interest rate
Acyclic: Monetary Base
9. Suppose the savings rate of a country declines. Based on the steady state in Solow model
What is the effect on capital-labor ratio, output per-capita output growth?
Chapter 4
10. What impact do you think the U.S. Can take the Immigration Act 1990 which promotes the immigration of skilled workers on long-term growth in the economy?
Chapter 4
11. For a given level of GNP, discuss what happens to personal income, disposable personal income, personal consumption expenditures and personal savings if:
The answers are based on the picture page. 395
A) climb up personal taxes
Personal disposable income decreases. Is a smaller percentage that can be devoted to savings and personal CONUM
B) Increase the interest received
Reduces personal income. . Is a smaller percentage that can be devoted to savings and personal CONUM
C) Decline personal consumption expenditures
(and personal income remain constant and available) in this case will be allocated a greater percentage of income to savings.
D) lower corporate profits
Personal income increases of the fibula. . Is a higher percentage that can be devoted to savings and personal CONUM.