Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 6, Problem 5P
To determine
Output and employment.
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Question2 Imagine you work for a firm that only utilizes labor and capital as inputs and has a
CES production function:
q = f(L, K) = [aLº + BK²] 2/2
Where a = B=0.5.y = 1.p = 2.
a. What is the MPL ? What does this mean economically?
b. What is the MPK? What does this mean economically?
c. What is the MRTS? What does this mean economically?
d. Does this CES function have constant, increasing, or decreasing returns to scale?
The Great Financial Crisis (GFC) mainly hit financing and hence theability of companies to finance investment, while the Corona crisis haspredominantly hit the labour input via the lockdown.! Calculate the impact of both crises on long-run growth assuming that thelabour share is 0.7 and the following information are given:– GFC: Growth rate of labour = 0%, Growth rate of capital= -5%, Growth rate of TFP =1%– Corona Crisis: Growth rate of labour = -5%, Growth rate of capital = 0%, Growth rateof TFP = 1%! Discuss whether and under what circumstances the lockdown will lead toa lower potential output in the long-run.! In the light of the growth accounting insights, what policies would yourecommend to revive growth after the lockdown?
2. Consider Kadokawa.inc, a merchandising
company in japan producing keychain with a flat
rate of 3$ per keychain.
Number
Number of
MPL TR
MRPL
keychains
produced
per day
of
Workers
1
30
2
80
3
110
4
135
... ..
5
20
170
7
30
.....
.....
.....
8.
15
а.
Fill in all the blanks in the table above
b. Verify that MRPL for this firm can be
calculated in two ways: (1) change in TR
from an additional worker and (2) MPL times
the price of output
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