Q1. Suppose the Required Reserve Ratio = .20 and that a new $100 billion of reserves are injected into the system. By how much might the Money Supply expand if banks choose to lend all excess reserves?
Q2. Consider a production function for an economy: Y = 20 (L.5K.4N.1) where L is labor, K is capital, and N island. In this economy the factors of production are in fixed supply with L = 100, K = 100, and N = 100. a. What is the level of output in this country? b. Does this production function exhibit constant returns to scale. Show by example. c. If the economy is competitive so that factors of production are paid the value of their subsidiary products, what is the share of total income that will go to land?