Problem Set 2

Problem Set 2 is due at the beginning of class on Tuesday, September 14, 2010.


Problem Set 2 Directions: To receive full credit for this assignment, you must show all work. Calculators and/or computer software should not be used for this assignment.

Complete the following problems:

• Suppose an economy has only two sectors, Goods and Services. Each year, Goods buys 20% of its own output and sells the other 80% of its output to Services, while Services buys 30% of its own output and sells the other 70% of its output to Goods. Find equilibrium prices for the annual output of the Goods and Services sectors that make each sector's income equal its expenditures.
• Section 1.3 (1e, 2d, 7b, 9, 11)
• Section 1.4 (12, 13b, 16)