Use the neoclassical theory of distribution to predict the impact on the real wage and the real rental price of capital of each of the following events: bon a

Use the neoclassical theory of distribution to predict the impact on the real wage and the real rental price of capital of each of the following events: bon a. A wave of immigration increases the labor force. b. An earthquake destroys some of the capital stock. c. A technological advance improves the production function. d. High inflation doubles the prices of all factors and outputs in the economy.
2. Work It Out . Suppose the production function in medieval Europe is Y= K0.5 10.5, where K is the amount of land and L is the amount of labor. The economy begins with 100 units of land and 100 units of labor. Use a calculator and equations in the chapter to find a numerical answer to each of the following questions. 5. a. How much output does the economy produce? b. What are the wage and the rental price of land? 6. c. What share of output does labor receive? d. If a plague kills half the population, what is the new level of output? e. What are the new wage and rental price of land? f. What share of output does labor receive now? 8. If a 10 percent incrence
8. The government raises taxes by $100 billion. If the marginal propensity to consume is 0.6, what happens to the following? Do they rise or fall? By what amounts? a. Public saving b. Private saving c. National saving d. Investment
10. Work It Out • Consider an economy described as follows: Y= C+ I + G. Y= 8,000. G= 2,500. T= 2,000. C = 1,000 + 2/3 (Y - T). I = 1,200 - 100 r. a. In this economy, compute private saving, public saving, and national saving. b. Find the equilibrium interest rate. c. Now suppose that G is reduced by 500. Compute private saving, public saving, and national saving. d. Find the new equilibrium interest rate.