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II) A consumer behavior is described by the equation Yt = Ct + St where Yt,...
II) A consumer behavior is described by the equation Yt = C+ + St where Yt,...
II) A consumer behavior is described by the equation Yt = C+ + St where Yt, Ct and St stand respectively for the income, consumption and saving of the consumer at the time period t. We assume that Ct = {Y{+1 – 7 and S4 = 55 Y4 at any time period t. 1. Write down the difference equation of consumption of the consumer. 2 marks For the subsequent questions, we assume that the consumption of the consumer satisfies the...
II) A consumer behavior is described by the equation Y1 = C4 + Se where Yt,...
II) A consumer behavior is described by the equation Y1 = C4 + Se where Yt, C and S, stand respectively for the income, consumption and saving of the consumer at the time period t. We assume that C = Y+1 - 7 and S = Y, at any time period t. 1. Write down the difference equation of consumption of the consumer. 2 marks For the subsequent questions, we assume that the consumption of the consumer satisfies the relation:...
II) A consumer behavior is described by the equation Y4 = C+ + S where Y,...
II) A consumer behavior is described by the equation Y4 = C+ + S where Y, Ct and S stand respectively for the income, consumption and saving of the consumer at the time period t. We assume that Ct = {Y{+1 – 7 and S = 3 Y at any time period t. 1. Write down the difference equation of consumption of the consumer. 2 marks For the subsequent questions, we assume that the consumption of the consumer satisfies the...
Consumption-Savings Consider a consumer with a lifetime utility function U = u(Ct) + _u(Ct+1) that satisfies...
Consumption-Savings Consider a consumer with a lifetime utility function U = u(Ct) + _u(Ct+1) that satisfies all the standard assumptions listed in the book. The period t and t + 1 budget constraints are Ct + St = Yt Ct+1 + St+1 = Yt+1 + (1 + r)St (a) What is the optimal value of St+1? Impose this optimal value and derive the lifetime budget constraint. (b) Derive the Euler equation. Explain the economic intuition of the equa- tion. (c)...
Consider the Solow growth model. Output at time t is given by the production function Yt...
Consider the Solow growth model. Output at time t is given by the production function Yt = AK 1 3 t L 2 3 where Kt is total capital at time t, L is the labour force and A is total factor productivity. The labour force and total factor productivity are constant over time and capital evolves according the transition equation Kt+1 = (1 − d) ∗ Kt + It , where d is the depreciation rate. Every person saves...
Consider the Solow growth model. Output at time t is given by the production function Yt...
Consider the Solow growth model. Output at time t is given by the production function Yt = AKt3 L3 , where A is total factor productivity, Kt is total capital at time t and L is the labour force. Total factor productivity A and labour force L are constant over time. There is no government or foreign trade and Yt = Ct + It where Ct is consumption and It is investment at time t. Every agent saves s share...
Consider the Solow growth model. Output at time t is given by the production function Y-AK3...
Consider the Solow growth model. Output at time t is given by the production function Y-AK3 Lš where K, is total capital at time t, L is the labour force and A is total factor productivity. The labour force and total factor productivity are constant over time and capital evolves according the transition equation KH = (1-d) * Kit It: where d is the depreciation rate. Every person saves share s of his income and, therefore, aggregate saving is St-s...
Consider the Solow growth model that we developed in class. Output at time t is given...
Consider the Solow growth model that we developed in class. Output at time t is given by the production function where A is total factor productivity, Kt is total capital at time t and L is the labour force. Total factor productivity A and labour force L are constant over time. There is no government or foreign trade and where Ct is consumption and It is investment at time t. Every agent saves s share of his income and consumes...
The following problem is based on the idea of a Malthusian trap. Thomas Malthus, an 18th...
The following problem is based on the idea of a Malthusian trap. Thomas Malthus, an 18th century British cleric and scholar, argued that as population increases, the limited amount of natural resources will lead societies into a trap of gradually decreasing standard of living, thus negating the effects of any technological progress. We can study this idea using the Solow model framework. Consider a modified version of the Solow growth model where the aggregate production function in period t is...
1. (45 points) Consider the closed-economy one-period macroeconomic model developed in class. The...
1. (45 points) Consider the closed-economy one-period macroeconomic model developed in class. The consumer is endowed with h units of time, and chooses consumption C and leisure ` to maximize U = log(C) + θlog(`), subject to the budget constraint C = wNs + π. Production is described by Y = zNd . Government spending G is financed with a proportional revenue tax (tax rate τ ) on the firm. (a) (10) Find the firm’s optimal demand for labor Nd...
II) A consumer behavior is described by the equation Yt = C+ + St where Yt, Ct and St stand respectively for the income, consumption and saving of the consumer at the time period t. We assume that Ct = {Y{+1 – 7 and S4 = 55 Y4 at any time period t. 1. Write down the difference equation of consumption of the consumer. 2 marks For the subsequent questions, we assume that the consumption of the consumer satisfies the...
II) A consumer behavior is described by the equation Y1 = C4 + Se where Yt, C and S, stand respectively for the income, consumption and saving of the consumer at the time period t. We assume that C = Y+1 - 7 and S = Y, at any time period t. 1. Write down the difference equation of consumption of the consumer. 2 marks For the subsequent questions, we assume that the consumption of the consumer satisfies the relation:...
II) A consumer behavior is described by the equation Y4 = C+ + S where Y, Ct and S stand respectively for the income, consumption and saving of the consumer at the time period t. We assume that Ct = {Y{+1 – 7 and S = 3 Y at any time period t. 1. Write down the difference equation of consumption of the consumer. 2 marks For the subsequent questions, we assume that the consumption of the consumer satisfies the...
Consider the Solow growth model. Output at time t is given by the production function Y-AK3 Lš where K, is total capital at time t, L is the labour force and A is total factor productivity. The labour force and total factor productivity are constant over time and capital evolves according the transition equation KH = (1-d) * Kit It: where d is the depreciation rate. Every person saves share s of his income and, therefore, aggregate saving is St-s...
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