Chapter 3. National Income: Where it Comes From, Where it Goes

Homework: p. 78-79 #1, 4a c, d; 10 macromodel: equilibrium_interest_rate 1, 3, 7

Won’t be responsible for the appendix.

Link to syllabus

Fig. 3-1 p. 48. Circular Flow

Fig. 3-2 p. 54.The determination of the earnings of a factor of production.

Fig. 3-3 p. 56. The Slope of the Production Function.

Fig. 3-4 p. 56. The Marginal Product of Labor

Figure 3-5 p. 61. The ratio of labor income to total income

In earlier edition, was in Appendix as Fig. 3-13 p. 73

Karabarbounis QJE 2014

Income Composition of Top Groups within the Top Decile, 1929 and 1998 (Piketty, QJE 2003)

Table 3-1 p. 63. Growth in Labor Productivity and Real Wages in the US

Point is that these two move together, implying that productivity is the major determinant of wage income

Fig. 3-6, p. 65. The Consumption Function

Fig. 3-7 p. 66. The Investment Function

The prime interest rate and the Federal funds rate

Different text

Parallels the textbook’s discussion on page 67.

Link to data from the Minneapolis Fed

Fig. 3-8 p. 71. Savings, Investment, and the Real Interest Rate

Fig. 3-9 p. 72. A Reduction in Saving

Gov’t spends more, National Savings declines, interest rates rise,

private investment falls. “Crowding Out.” Bad guy.

Fig. 3-10 p. 73. Military Spending and Interest Rates in the U.K.

Fig. 3-11 p. 75. An Increase in Investment Demand: Fixed Savings

Fig. 3-12 p. 76 Increase in Investment Demand with Savings Responding to Interest Rates

Equilibrium in the Loanable Funds Market. Fig 10-4 p. 284Econ 201 text: Krugman and Wells

Fig 15-3, p. 454. Equilibrium in the Money MarketEcon 201 text: Krugman/Wells

Homework Problems P. 76

#1.In neoclassical model, how do these affect real wage and rental price of capital? a). Wave of immigrants. b. Earthquake destroys capital. C. Tech change

#3. Changes in incomes of farmers and barbers (unskilled manual work):If Farmers have productivity gains, and barbers do not

#9. If consumption (and therefore saving) depend on interest rate, how does that affect analysis of fiscal policy.

Appendix

Fig. 3-12, p. 67. The Identification

Problem