### Intermediate Macroeconomics Solutions

 Problem Set 1 - Questions PDF Chapter 3 - National Income - Questions 2, 4a, 4b, and 5 Chapter 5 - Inflation - Question 3 Chapter 6 - The Open Economy - Questions 1, 2, and 11 The Production Function, Finding the Wage Rate, Rental Rate, and Labor's Share of Income  (video 20:00)  From Mankiw's Macroeconomics (Intermediate), 8th Edition. Chapter 3 (National Income, where it comes from and where it goes), Problem 2 - Part a and b In this problem we are given a simple production function and a partially parameterized Cobb-Douglas Production Function. We derive output/production, then find the real wage rate (finding the marginal product of labor) and the rental rate of capital (finding the marginal product of capital along the way... actually the marginal product of land, but it's the same steps to find MPK). Lastly, finding the labor share of income, and the capital share of income. Plus a "trick" to find the factor share of income by just looking at the Cobb-Douglas production function.  Find the Labor Share of Income (video 7:45) From Mankiw's Macroeconomics (Intermediate), 8th Edition. Chapter 3 (National Income, where it comes from and where it goes), Problem 2 - Part c In this question, we're given a partly parameterized Cobb-Douglas Production Function, and actual values for Labor and Capital (technically capital is land in this problem). We then find the portion of total income that goes to Labor. Plus show a trick, given any Cobb-Douglas Production Function with constant returns to scale, how you can look at the production function and find the labor share of income and capital share of income quickly. From Mankiw's Macroeconomics (Intermediate), 8th Edition.  Chapter 3 (National Income, where it comes from and where it goes), Problem 2 - Part d through e In this video we quickly find output, wages rental price of land, and labor's share of income given a dramatic decrease in labor.  Find Changes in the Fraction of Income Going to Labor, Output, Rental Price of Capital and the Real Wage (video 22:30) From Mankiw's Macroeconomics (Intermediate), 8th Edition. Chapter 3 (National Income, where it comes from and where it goes), problem 4a and 4b We are given a simple Cobb-Douglas production function and we find labor's share of income. Then, we get a shock of one of our factor inputs, labor increases by 10%. We calculate how production/output increases, how wages change, and how the rental price of capital changes. Real Wages Related to Labor Productivity, Labor's Share of Income (with Cobb-Douglas Prod Function) (video 8:00) From Mankiw's Macroeconomics (Intermediate), 8th edition, Chapter 3 (National Income, where it comes from and where it goes), question 5.  Given the simple Cobb-Douglas production function, we relate changes in real wages to change in labor productivity and labor's share of income in the US since the 1960's. This works out oddly well. Returns to Scale ReviewExamples of Calculating Returns to ScaleGiven a number of production functions (including Cobb-Douglas production function,  partially parameterized Cobb-Douglas and others) we calculate the return to scale -- whether or not these functions are increasing returns to scale (IRS), decreasing returns to scale (DRS) or constant returns to scale (CRS).  Video 31:11 - http://www.youtube.com/watch?v=gPyPvWxJOlc  Chapter 5 - Problem 3 - No Review The money demand equation and the inflation rate.  Small Open Economy Model Overview - Example with a Drop in Consumer Confidence  (video 30:00) From Mankiw's Macroeconomics (Intermediate) 8th edition. Chapter 6 (The Open Economy), Problem 1, Part a. In this first video, we overview the model for the small open economy. What are the determinants for net exports (the trade balances, capital flows), the real exchange rate, and the nominal exchange rate? We talk about trade surpluses, trade deficits, and the market for loanable funds for a closed economy and for a small open economy (SOE). We also do an example where consumer savings increases, analyzing the effect on net exports and exchange rates.   The model of the small open economy. Given shocks to the economy (e.g. fall in consumer confidence, shift in investment, shift in preferences for foreign goods, an increase in the money supply, and a change in money velocity) find net exports (NX), the nominal and real exchange rates.  Chapter 6 - Problem 2 - No Review Given data for national income, find national savings, investment, the trade balance and the real exchange rate.  Chapter 6 - Problem 11 - No Review The open economy model, poor countries, "better production efficiency and legal protection," and the effect on investment. Plus how this might effect demand for loanable funds, the trade balances, the real world exchange rate

Comments