Q: Consider an individual who lives from 0 to T, and whose
Consider an individual who lives from 0 to T, and whose lifetime utility is given by U =T t=0 u(C(t))dt, where u(•) > 0,u(•) < 0. The individual’s income is Y0 +gt for 0 ≤ t < R, and 0 for R ≤ t ≤ T....
See AnswerQ: Suppose the only assets in the economy are infinitely lived trees.
Suppose the only assets in the economy are infinitely lived trees. Output equals the fruit of the trees, which is exogenous and cannot be stored; thus Ct = Yt, where Yt is the exogenously determined o...
See AnswerQ: Consider an economy with two possible states, each of which occurs
Consider an economy with two possible states, each of which occurs with probability one-half. In the good state, each individual’s consumption is 1. In the bad state, fraction λ of the population cons...
See AnswerQ: Consider a worker searching for a job. Wages, w,
Consider a worker searching for a job. Wages, w, have a probability density function across jobs, f (w), that is known to the worker; let F(w) be the associated cumulative distribution function. Each...
See AnswerQ: Suppose that, as in Section 8.2, the instantaneous
Suppose that, as in Section 8.2, the instantaneous utility function is quadratic and the interest rate and the discount rate are zero. Suppose, however, that goods are durable; specifically, Ct =(1−δ)...
See AnswerQ: Suppose that the utility of the representative consumer, individual i,
Suppose that the utility of the representative consumer, individual i, is given by T t=1 [1/(1+ρ)t](Cit/Zit)1−θ/(1−θ), ρ>0,θ>0, where Zit is the ‘‘reference” level of consumption. Assume the interest...
See AnswerQ: Consider an individual who lives for two periods and has constant-
Consider an individual who lives for two periods and has constant-absolute risk-aversion utility, U =−e−γC1 − e−γC2,γ>0. The interest rate is zero and the individual has no initial wealth, so the indi...
See AnswerQ: Consider an individual who lives for three periods. In period 1
Consider an individual who lives for three periods. In period 1, his or her objective function is lnc1 +δ lnc2 +δ lnc3, where 0
See AnswerQ: Consider the dynamic programming problem that leads to Figure 8.4
Consider the dynamic programming problem that leads to Figure 8.4. This problem asks you to solve the problem numerically with one change: preferences are logarithmic, so that u(C) = lnC. Specifically...
See AnswerQ: Consider the following seemingly small variation on part (b) of
Consider the following seemingly small variation on part (b) of Problem 8.16. Choose an N, and define e ≡ 200/N. Now, assume that Y can take on only the values 0,e,2e,3e,...,200, each with probability...
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