1) Over the past year, productivity grew 1%, capital grew 4%, and labor grew 2%.
ID: 1104171 • Letter: 1
Question
1) Over the past year, productivity grew 1%, capital grew 4%, and labor grew 2%. If the elasticities of output with respect to capital and labor are 0.5 and 0.5, respectively, how much did output grow? A)3% B) 4% C)5% D) 6% 2) In the long run, an increase in the population growth rate in a steady-state economy will calise A) an increase in capital per worker and an increase in consumption per worker B) an increase in capital per worker and a decrease in consumption per worker C) a decrease in capital per worker and a decrease in consumption per worker D) a decrease in capital per worker and an increase in consumption per worker. 3) You transfer 8500 from your checking account to your savings account. What is the overall effect on Ml and M2? A) M1 falls by S500, M2 rises by $500. B) M1 falls by 8500, M2 is unchanged C) M1 rises by $500, M2 is unchanged D) MI is unchanged, M2 rises by $500. 4) An increase in real interest rate on non-monetary assets is likely to cause A) a decline in the real money demand B) an increase in the real money demand. C) no change in the real money demand D) no change in the real money demand only if the income elasticity of real money demand is zero.Explanation / Answer
1. Y/Y = A/A + aK K/K + aN N/N
= 1 + 4*0.5 + 2*0.5
= 1+ 2 +1
=4%
Option B
2. In the long run, an increase in the population growth rate will decrease capital per worker and increase consumption per worker.
Option D
3. Since your savings and checking accounts are included in M2, moving money from one account to the other does not change the M2 balance.
However, savings accounts are not included in the M1 category. Transferring money from checking to savings withdraws money from circulation and decreases the M1 money supply.
Option B
4. an increase in real interest rate on non-monetary assets is likely to cause decline in real money demand
Option A
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