THE UNIVERSITY OF ILLINOIS AT CHICAGO ECON 221: MACROECONOMICS IN THE WORLD ECONOMY SPRING 2012 Prof. George Karras Your name: Homework 1 1. [2...

lơk at the pdf file. answer number 2 2. [8 points] (a) Suppose an economy is hit by an adverse oil shock. Use the labor market and theproduction function to predict the effects on employment, real wages, unemployment, and realoutput. (b) Consider the following data for Japan:Note that oil prices tripled in 1974. Are your predictions in (a) consistent with the Japaneseexperience of the mid-1970s?