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ECON510 - Mid Term 2 - Problem Solv - Spring 2015

This document appears to be an exam for a midterm in an economics course. It contains two problems with multiple parts each. Problem 1 asks the student to (a) calculate the real wage for labor, (b) calculate the labor demand, and (c) identify what type of unemployment would be observed if the government sets a minimum wage above the market wage. Problem 2 asks the student to (a) derive the IS equation given consumption, tax, government spending, and investment functions, (b) derive the LM equation given a money supply, price level, and money demand function, and (c) calculate the equilibrium interest rate and income level by solving the IS-LM model.

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Diamante Gomez
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123 views2 pages

ECON510 - Mid Term 2 - Problem Solv - Spring 2015

This document appears to be an exam for a midterm in an economics course. It contains two problems with multiple parts each. Problem 1 asks the student to (a) calculate the real wage for labor, (b) calculate the labor demand, and (c) identify what type of unemployment would be observed if the government sets a minimum wage above the market wage. Problem 2 asks the student to (a) derive the IS equation given consumption, tax, government spending, and investment functions, (b) derive the LM equation given a money supply, price level, and money demand function, and (c) calculate the equilibrium interest rate and income level by solving the IS-LM model.

Uploaded by

Diamante Gomez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ECON510

Name: _____________________________

Mid Term 2

Spring 2015
I.D.:_______________

Answer both problems. The values within the parenthesis indicate points. Show all your steps to avoid
mistakes and also for full credit. Use formula sheet for the as appropriate. Best of luck.
Problem 1:
Given

Y=A K L

A=10, K=100, L=100, =1/3 . Answer the following using this

information.
a. What is the real wage for labor? (4 points)

b. What is the labor demand? (4 points)

c. What type of unemployment would we observe if government sets minimum wage equal to 7
units of real GDP? (2 points)

ECON510
Name: _____________________________

Mid Term 2

Spring 2015
I.D.:_______________

Problem 2:
a. Given

C=200+0.60 ( Y T ) ,T =100, G=100,I =4020 r . Find the IS Equation? (5

points)

b. Given

M =5000, P=4 ,

M d
=50 Y 250 r . Find the LM Equation? (5 points)
P

( )

c. Find the equilibrium interest rate and income? (5 points)

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