Need help with Macroeconomics homework

Posted on 2014-04-01 11:17:00 in Economics by SARAH

I have an assignment due in 3 days and I've been stuck on it for over a week, I cant wrap my head around it or find answers in the readings we were given :( this is the assignment :



Consider a closed economy with no government.



The production function is given by , assuming that labour is the only input and the coefficient is constant, and .



Prices are determined by the mark-up pricing rule, i.e. marked up over costs, and is given by , where is the profit mark-up, assume it to be a constant, is the wage-rate and is the number of labour.



Assume that a constant fraction of profit is saved and that no wage is saved.



Answer the following:



Calculate the share of profits and share of wages in the total income of the economy. [5]



Derive the output multiplier for this economy. What is the analytical condition under which the output multiplier can be negative? [20]

Explain the economic intuition behind the negative multiplier? [5]



Please please PLEASE help its worth 30% of the final grade :(

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