# Macroeconomics Problem Set Solutions Blanchard

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14.05 intermediate applied macroeconomics problem set solutions

Without any taxation or social security, the relation between kt and kt+1 would be just as it is above but without the Zt T term. If Zt is positive, this means we have shifted down the kt+1 = m(kt ) curve relative to the no-tax case. In turn, this reduces the steady state value ofIt follows that all we need to do is ﬁnd the sign of Zt . Zt 1+ρ rt+1 − n = 1− 2+ρ 1 + rt+1 (2 + ρ)(1 + rt+1 ) − (1 + ρ)(rt+1 − n) = (2 + ρ)(1 + rt+1 ) (1 + rt+1 ) + (1 + ρ)(1 + n) = >(2 + ρ)(1 + rt+1 )14.02 principles of macroeconomics problem set 1 solutions spring 2003

GDP can be calculated in three equivalent ways: • Value of final goods and services: $500 (the final retail value of the bats) • Sum of value added: Value added by a firm is the final value of its good, minus the value of the intermediate goods used in production. ie: Nomar: $120 Manny: $300 - $120 = $180 Pedro: $500 - $300 = $200 TOTAL VALUE ADDED = $120 + $180 + $200 = $500 • Sum of incomes: Total labor income = 70 + 80 + 70 = $220 Total profits (capital income) = 50 + 100 + 90 = $240 Indirect taxes = $.ec 1011b: macroeconomic theory problem set 2 solutions problem one

1+it e The uncovered interest rate parity condition is 1+i∗ = EEt , where Et+1 is the expected e t t+1 amount of domestic currency to be received per unit of foreign currency at t + 1, and Et is the amount of domestic currency that can be obtained (currently) at time t per unit of foreign currency. It means that i∗ is high relative to i, it is only because the foreign currency is expected to depreciate heavily relative to the domestic currency. In the case of Zimbabwe, rapid expected currency depreciation.14.462 advanced macroeconomics spring 2004 problem set 5 solution

∗ The function X is strictly increasing. Let θp (˜ be the level of fundamentals at which z) ∗ the inequality above holds with equality, that is X(θp (˜ = x∗ (˜ Then regime z)) p z). −1 ∗ z). change occurs if and only if θ ≤ θp (˜ Let’s write Θ = X , then we can write ∗ ∗ θp (˜ = Θ(xp (˜ That is, for a given participation threshold x∗ (˜ the function Θ z) z)). p z), will give us the threshold of fundamentals below which regime change occurs. ˜ Now let H(x∗ (˜ x, z ) be the expected utility from attacking .
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