ECON510

Name: _____________________________

Mid Term 2

Spring 2015
I.D.:_______________

Answer both problems. The values within the parenthesis indicate points. Show all your steps to avoid
mistakes and also for full credit. Use formula sheet for the as appropriate. Best of luck.
Problem 1:
Given

Y=A K L

A=10, K=100, L=100, =1/3 . Answer the following using this

information.
a. What is the real wage for labor? (4 points)

b. What is the labor demand? (4 points)

c. What type of unemployment would we observe if government sets minimum wage equal to 7
units of real GDP? (2 points)

ECON510
Name: _____________________________

Mid Term 2

Spring 2015
I.D.:_______________

Problem 2:
a. Given

C=200+0.60 ( Y T ) ,T =100, G=100,I =4020 r . Find the IS Equation? (5

points)

b. Given

M =5000, P=4 ,

M d
=50 Y 250 r . Find the LM Equation? (5 points)
P

( )

c. Find the equilibrium interest rate and income? (5 points)