By NEAS - 10/31/2018 9:24:55 PM
Macro module 24 New Keynesian model practice exam questions
(The attached PDF file has better formatting.)
[The following scenario applies to the next two questions.]
The market for a good has imperfect competition. For firms making the good:
● The price of the good = 8.77 per unit
● The real interest rate is 4.0% per annum
● The mark-up ratio is 1.81
● The marginal product of labor = 4.79 units of the good per worker-hour
● The marginal product of capital = 4.90 units of the good per unit of capital
● The price level is 149
Question 24.1: Nominal wage rate
What is the nominal wage rate per hour?
Solution 24.1: The markup ratio = price per unit / [nominal wage rate / marginal product of labor], so
nominal wage rate = price per unit / [markup ratio / marginal product of labor]
= 8.77 / (1.81 / 4.79) = 23.21
Question 24.2: Real wage rate
What is the real wage rate per hour?
Solution 24.2: The real wage rate = the nominal wage rate / the price level = 23.21 / 1.49 = 15.58
|
|