Perfect Competition and Fixed Prices: Ex ercises - Eleni Iliopulos
the government PG Ï T, determine the equilibrium, especially the level of employment. 4. Determine the effect of an increase of G on N. Give an economic.
Macroeconomics - Spring Semester - QEM 1 Eleni Iliopulos Spring 2015
Perfect Competition and Fixed Prices: Exercises Exercise 1 1. A representative …rm produces the unique homogeneous …nal good using the technology Y = N , with Y the output and N the employment. Note W the nominal wage and P the price of the …nal good. Determine the optimal behavior of this producer. 2. A representative consumer has preferences de…ned on consumption C, real money demand M=P and leisure H N , with H > 0 the time endowment. His utility function is de…ned by: C 0:2 (M=P )0:7 + 0:1 ln(H
N)
S/He has the stock of money M0 > 0 as endowment, receives the pro…ts of the …rm and need to pay a lump-sum tax T . (i) Write the budget constraint. (ii) Determine the optimal behavior of the consumer. 3. Let G be the level of public spending. Using the balanced budget of the government P G = T , determine the equilibrium, especially the level of employment. 4. Determine the e¤ect of an increase of G on N . Give an economic interpretation.
1
Exercise 2 We introduce the following notations: N d the labor demand, N s the labor supply, Y d the demand of product, Y s the supply of product, P the price of good, W the nominal wage, and M0 > 0 the stock of money. We assume that: 1 P ; N s = 1=3 W 1 P 1 M0 ; Ys = Yd = P W
Nd =
and the production function is F (N ) = N 1= . 1. Compute the perfectly competitive equilibrium. 2. Determine the conditions such that one obtains keynesian unemployment and represent it on a graph. 3. Determine the conditions such that one obtains classical unemployment and represent it on a graph.
of agents, producers, consumers and a government, and perfect competition,. i.e. all agents are price$takers and prices are flexible. 1.1 Production Sector.
%2. . However, as firms increase the quantity produced, the marginal costs of production ... Suppose small country H has a comparative advantage in producing.
Mar 21, 2013 - have some control over price. Also, firms tend to specialize because in monopolistic competition we have increasing returns to scale ...
i) Varian, Microeconomic Analysis, W. W. Norton. ii) Wickens (2008), Macroeconomic Theory: a general equilibrium approach, Princeton. University Press.
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This course aims at providing an introduction to the standard literature on international trade and on the related policy issues. It analyzes the empirical and ...
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Can you show graphically that a small country (no impact of its demand on the world price) always has welfare losses from imposing a tariff? II. 4. Equivalence of ...
also last one or several periods. Models introduce a positive shock today and zero shocks thereafter. (with certainty). The solution does not require linearization, ...
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analyze simple static models characterized by 3 goods: labor, money and ... of nominal rigidities and set an open economy general equilibrium framework.