Question 1: Money demand in an economy is Md/P = 500 + 0.2Y – 1000i. (3 marks) You know that P = 100, Y = 1000, and i = 0. Find real money demand,…
September 3, 2020
Assume the following for the town of Boone:
September 3, 2020

Assume that the hypothetical economy of Mo has 8 workers in year 1, each working 1,500 hours per year (50 weeks at 30 hours per week). The total input of labor is 12,000 hours. Productivity (average real output per hour of work) is $10 per worker.

Instructions:

a. What is real GDP in Mo ?

$

Suppose work hours rise by 5 percent to 12,600 hours per year and labor productivity rises by 5 percent to $10.5.

b. In year 2, what will be Mo real GDP?

$

c. Between year 1 and year 2, what will be Mo rate of economic growth?

percent

KM
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