Question: The discovery of a new technology increases the expected future marginal product of capital. a. Use the classical IS-LM model to determine the effect of

The discovery of a new technology increases the expected future marginal product of capital.
a. Use the classical IS-LM model to determine the effect of the increase in the expected future MPK on current output, the real interest rate, employment, real wages, consumption, investment, and the price level. Assume that expected future real wages and future incomes are unaffected by the new technology. Assume also that current productivity is unaffected.
b. Find the effects of the increase in the expected future MPK on current output and prices from the AD-AS diagram based on the misperceptions theory. What accounts for the difference with part (a)?

Step by Step Solution

★★★★★

3.40 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a The increase in MPKf leaves aggregate supply unchanged since expected future labour income and exp... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

797-B-E-M-E (7908).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

Use the saving-investment diagram to analyze the effects of the following on national saving, investment, and the real interest rate. Explain your reasoning. a. Consumers become more future-oriented...

True or False: The discovery of a new method of birth control that is safer, cheaper, more effective, and easier to use than any other method would reduce the number of unwanted pregnancies.

An article in BusinessWeek reported the discovery of a new processing technology that makes it economically feasible to turn natural gas into a liquid petroleum that yields superclean gasoline,...

1 The discovery of a new technology increases the expected future marginal product of capital. a. Use the classical IS-LM model to determine the effect of the increase in the expected future MPK on...

1. The discovery of a new technology increases the expected future marginal product of capital. a. Use the classical IS-LM model to determine the effect of the increase in the expected future MPK on...

2. Classical IS-LM-FE and AD-AS The discovery of a new technology increases the expected future marginal product of capital. a) Use the classical IS-LM model1 to determine the effect of the increase...

The discovery of a new technology increases the expected future marginal product of capital. a) Use the classical IS-LM model1 to determine the effect of the increase in the expected future MPK on...

+1. The discovery of a new technology increases the expected future marginal product of capital. a. Use the classical ISLM model to determine the effect of the increase in the expected future MPK on...

The discovery of a new technology increases the expected future marginal product of capital. a. Use the classical IS-LM model to determine the effect of the increase in the expected future MPK on...

1. The discovery of a new technology increases the expected future marginal product of capital. a. Use the classical ISLM model to determine the effect of the increase in the expected future MPK on...

For 11.20 kg of a magnesium-lead alloy of composition 30 wt% Pb-70 wt% Mg. is it possible, at equilibrium, to have a and Mg,Pb phases having respective masses of 7.39 and 3.81 kg? If so, what will be...

Ideal Gas Law Worksheet PV = nRT Use the ideal gas law, and the universal gas constant R = 0.0821 Latm to solve the following problems: K mol If pressure is needed in kPa then convert by multiplying...

5.17 The cited value of 74% is part of a. the marginal distribution of age group. b. the conditional distribution of coffee consumption, given age group. c. the conditional distribution of age group,...

A researcher evaluates the relationship between leadership level (foreman, supervisor, manager) and productivity (below standards, meets standards, exceeds standards) using a chi-square test for...

In Table, when output rises from 90 to 130 units, marginal cost is $3.00. For this change in output, marginal cost is greater than the previous AVC ($2.67) but less than the previous ATC ($4.33)....

A soft drink manufacturer that uses just labor (variable) and capital (fixed) paid a consulting firm thousand of dollars to calculate short-run costs at various output levels. But after the cost...

If a firm has diminishing returns to labor over some range of output, it cannot have economies of scale over that range. True or false? Explain briefly.

Larissa has been talking with the companies directors about the future of east coast yachts. To this point, the company has used outside suppliers for various key component of the companies yachts,...

Which of the following are true for both an operating as well as a financial lease: A. Cancellation clauses are lower for financial leases than operating leases. B. Lessor carries insurance and...

Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6.3 million. The equipment will be depreciated straight line over 6 years to a value...