University of California, Irvine - ECON 100CHomework 1: Answers

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Econ 100C: Problem Set 1 Due in section the week of April 13-17 1. (Similar to Mankiw, Chapter 3, Problem 1): Use the Classical theory of distribution to the factors of production to predict the im... pact on the real wage and the real rental price of capital of each of the following events: a) A wave of immigration increases the labor force. b) An earthquake destroys some of the capital stock. c) High inflation doubles the prices of all factors and the price of output in the economy. d) A technological advance allows the economy to produce 10% more output for any given combination of capital and labor. (This would be an increase in the production function F.) 2. After a community is hit by a natural disaster (e.g., a hurricane or an earthquake), it’s often the case that local GDP rises for several quarters after the event (this was the case after the Northridge quake in LA, for example) [Show More]

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