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Appendix Sample

This appendix provides reminders on growth and production models, the bathtub model of employment, and elementary algebra and functions. It defines an aggregate production function relating output to labor and capital. It presents the bathtub model showing the relationship between employment and unemployment over time. It also reviews properties of exponents, arithmetic operations, and graphs of linear, exponential, logarithmic, and power functions.

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Berwyn Wong
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41 views2 pages

Appendix Sample

This appendix provides reminders on growth and production models, the bathtub model of employment, and elementary algebra and functions. It defines an aggregate production function relating output to labor and capital. It presents the bathtub model showing the relationship between employment and unemployment over time. It also reviews properties of exponents, arithmetic operations, and graphs of linear, exponential, logarithmic, and power functions.

Uploaded by

Berwyn Wong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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This appendix is a reminder for your convenience.

Appendix 1: Growth and Production Model


In this model, we have an aggregate production function F that requires labour (L) and
capital (K) services as inputs in order to produce some final good Y . Given the constant
returns to scale property of F , we can also think of this model in terms of per-worker
variables: y = f (A, k), where y := Y /L and k = K/L. An example of f is given as the
Cobb-Douglas function y = Ak 1/3 , where A > 0.

Appendix 2: The Bathtub Model of (Un)employment


The variables Et and Ut , respecLet the long-run labor force be a constant given by L.
tively, denote total employment and total unemployment levels.
For each date t 0, the model says:

Et + Ut = L,
and,
Ut+1 = sEt + (1

f )Ut

where 0 < f < 1 is the job finding rate and 0 < s < 1 is the job separation rate.

Appendix 3: Elementary Algebra and Functions


Let a, b, c, and d be some real numbers, unless otherwise stated.
Arithmetic operations. These are some useful reminders of elementary algebra. Other
operations can be derived from combining some of these operations.
_ ab = ba.
_ ab + ac = a(b + c).
_ a

b
c

_ a
_

a
b

ab
.
c

b = a + ( b).
+

c
d

ad+bc
,
bd

for any b 6= 0 and d 6= 0.

_ 0 a = 0.

Page 11 of 12 MACROECONOMICS 1 (ECON 1102 / 7074)

Exponent Properties. These are some useful properties to know when working with
exponents. Other properties can be derived from combining some of these above.
_ a0 = 1, for any a 6= 0.
_ a1 = a.
_ a

1
.
ab

_ ab ac = ab+c .
c

_ abc = (ac )b = ab .
p
_ a1/b = b a.
Functions and Graphs of Functions. Assume all functions f and g below are real
valued.
_ Ane (linear) functions of a single variable x: f (x) = mx + c, where m, c 2 R (i.e.
are real numbers). Let y = f (x).
` The first derivative function (or gradient) of f is denoted as f 0 and f 0 (x) = m,
for every x 2 R.
` The y-intercept of graph(f ) in (x, y)-space is c.
` The x-intercept of graph(f ) in (x, y)-space is

c/m.

_ Exponential, log and natural-log functions:


` ab = c () b = loga (c).

` f (x) = eg(x) () g(x) = loge (f (x)) = ln(f (x)), for every x > 0, where
e 2.718281828.
` ln(ab) = ln(a) + ln(b).
` ln(a/b) = ln(a)

ln(b).

` ln(a ) = b ln(a).
` ln(1 + a) a if

1 < a < 1 is very small number.

_ Power functions with domain R+ :


f (x) = c xa ,

where

1 < a < +1, c > 0 and x

0.

` The first derivative (gradient) function exists and, when evaluated at some
x 0, it has the value f 0 (x) = c a xa 1 .
` Some geometric properties of the graphs of f and f 0 relevant to our usage is
as follow. Note that f (0) = 0. If a > 0:
q then the value f (x) is strictly increasing in x;
q and also, if
a < 1, then f 0 (x) is decreasing in x; or
a > 1, then f 0 (x) is increasing in x; or
a = 0, then f 0 (x) is constant.
Page 12 of 12 MACROECONOMICS 1 (ECON 1102 / 7074)

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