Intermediate Macroeconomics Solutions

Problem Set 1 - Questions PDF - Solutions PDF
Chapter 3 - National Income - Questions 2, 4a, 4b, and 5
Chapter 5 - Inflation - Question 3
Chapter 6 - The Open Economy - Questions 1, 2, and 11

The Production Function, Finding the Wage Rate, Rental Rate, and Labor's Share of Income  (video 20:00) 
From Mankiw's Macroeconomics (Intermediate), 8th Edition. Chapter 3 (National Income, where it comes from and where it goes), Problem 2 - Part a and b
In this problem we are given a simple production function and a partially parameterized Cobb-Douglas Production Function. We derive output/production, then find the real wage rate (finding the marginal product of labor) and the rental rate of capital (finding the marginal product of capital along the way... actually the marginal product of land, but it's the same steps to find MPK). Lastly, finding the labor share of income, and the capital share of income. Plus a "trick" to find the factor share of income by just looking at the Cobb-Douglas production function. 

Find the Labor Share of Income (video 7:45)
From Mankiw's Macroeconomics (Intermediate), 8th Edition. Chapter 3 (National Income, where it comes from and where it goes), Problem 2 - Part c
In this question, we're given a partly parameterized Cobb-Douglas Production Function, and actual values for Labor and Capital (technically capital is land in this problem). We then find the portion of total income that goes to Labor. Plus show a trick, given any Cobb-Douglas Production Function with constant returns to scale, how you can look at the production function and find the labor share of income and capital share of income quickly.

Quickly find output, wages rental price of land, and labor's share of income (video 12:00)
From Mankiw's Macroeconomics (Intermediate), 8th Edition. 
Chapter 3 (National Income, where it comes from and where it goes), Problem 2 - Part d through e
In this video we quickly find output, wages rental price of land, and labor's share of income given a dramatic decrease in labor. 


Returns to Scale Review

Chapter 5 - Problem 3 - No Review
The money demand equation and the inflation rate. 

Small Open Economy Model Overview - Example with a Drop in Consumer Confidence
(video 30:00) From Mankiw's Macroeconomics (Intermediate) 8th edition. Chapter 6 (The Open Economy), Problem 1, Part a.
In this first video, we overview the model for the small open economy. What are the determinants for net exports (the trade balances, capital flows), the real exchange rate, and the nominal exchange rate? We talk about trade surpluses, trade deficits, and the market for loanable funds for a closed economy and for a small open economy (SOE). We also do an example where consumer savings increases, analyzing the effect on net exports and exchange rates  The model of the small open economy. Given shocks to the economy (e.g. fall in consumer confidence, shift in investment, shift in preferences for foreign goods, an increase in the money supply, and a change in money velocity) find net exports (NX), the nominal and real exchange rates. 

Chapter 6 - Problem 2 - No Review
Given data for national income, find national savings, investment, the trade balance and the real exchange rate. 

Chapter 6 - Problem 11 - No Review
The open economy model, poor countries, "better production efficiency and legal protection," and the effect on investment. Plus how this might effect demand for loanable funds, the trade balances, the real world exchange rate

Problem Set 2 - Questions PDF - Solutions PDF
Chapter 8 - Economic Growth Part 1 - Questions 1, 5, and 6.
Chapter 9 - Economic Growth Part 2 - Questions 3 and 5. 

Problems from Chapter 8 - Economic Growth Part 1


Review of Solow Growth Model - 25 videos
Several videos on many topics related to solow-swan growth model (aka the neoclassical growth model, or the exogenous growth model).

Problem Set 3 - Questions PDF - Solutions PDF
Chapter 11 - Aggregate Demand Part 1 - Questions 3, 5, and 6
Chapter 12 - Aggregate Demand Part 2 - Questions 3, 5, 9a,b,&c

Problems from Chapter 11 - Aggregate Demand Part 1

Chapter 12 Problem 3 - to come


Problems from Chapter 12 - Aggregate Demand Part 2

Problem Set 4 - Questions PDF - Solutions PDF
Chapter 16 - Understanding Consumer Behavior - Questions 3, 4, 9a & b. 
Chapter 17 - The Theory of Investment - Questions 1a, b, & c

No answers requested yet - but likely territory on the Final exam


Problem Set 5 - Questions PDF - Solutions PDF
Chapter 14 - Aggregate Supply, and the Trade-off Between Inflation and Unemployment - Problems & Applications 2, 5a.,6
Chapter 15 - Dynamic Model of Aggregate Supply and Demand - Questions 1, 2, and 5. 


Problems from Chapter 15 - Dynamic Model of Aggregate Supply and Demand

No answers requested yet - but likely territory on the Final exam
  • Chapter 15 - Question 1. Not answered here, sorry.

  • Chapter 15 - Question 2. Not answered here, sorry.

  • Chapter 15 - Question 5. Not answered here, sorry.

Problem Set 6 - Questions PDF - Solutions PDF
Chapter 18 - Alternative Perspectives on Stabilization Policy
Problems & Applications 1, 3a., b., c
Chapter 19 - Alternative Perspectives on Stabilization Policy
Questions for Review 4, 5 
- Problems & Applications 3, 4


Tax Cut, Budget Deficit and the Traditional View vs. the Ricardian View - Public, Private & National Savings
Chapter 19 - Questions for Review 4 & 5, Mankiw's Macroeconomics 8th ed
This problem deals with the effect of a tax cut - contrasting the "Traditional view" (that government debt does affect national savings and capital accumulation) and the "Ricardian view" (which suggests that government debt does not affect national savings)
Video 6:55 -

Macro Practice - Social Security, Marginal Propensity to Consume & Altruistically Linked Generations
Chapter 19 - Problem & Applications Question 3, Mankiw's Macroeconomics 8th ed
This question deals with how a change to the Social Security tax (this is a redistribution of income from  young to old) might affect the economy. We find our answer depends on the marginal propensities to consume of the young and old, and whether or not generations are linked altruistically
Video 5:21 -

Chapter 19 - Problem & Application Question 4. Not answered here, sorry.