Questions from Macroeconomics

Q: Consider the steady state of the model of Section 11.4

Consider the steady state of the model of Section 11.4. Let the discount rate, r, approach zero, and assume that the firms are owned by the households; thus welfare can be measured as the sum of utili...

Q: Consider a Diamond economy where g is zero, production is Cobb

Consider a Diamond economy where g is zero, production is Cobb Douglas, and utility is logarithmic. (a) Pay-as-you-go social security. Suppose the government taxes each young individual an amount T an...

Q: Consider an individual who lives for two periods and whose utility is

Consider an individual who lives for two periods and whose utility is given by equation (2.43). Let P1 and P2 denote the prices of consumption in the two periods, and let W denote the value of the ind...

Q: (a) Suppose it is known in advance that at some

(a) Suppose it is known in advance that at some time t0 the government will confiscate half of whatever wealth each household holds at that time. Does consumption change discontinuously at time t0? If...

Q: Assume that the instantaneous utility function u(C) in equation

Assume that the instantaneous utility function u(C) in equation (2.2) is lnC. Consider the problem of a household maximizing (2.2) subject to (2.7). Find an expression for C at each time as a function...

Q: Consider a household with utility given by (2.2)

Consider a household with utility given by (2.2) (2.3). Assume that the real interest rate is constant, and let W denote the household’s initial wealth plus the present value of its lifetime labor inc...

Q: Piketty (2014) argues that a fall in the growth rate

Piketty (2014) argues that a fall in the growth rate of the economy is likely to lead to an increase in the difference between the real interest rate and the growth rate. This problem asks you to inve...

Q: Describe how each of the following affects the c = 0 and

Describe how each of the following affects the c = 0 and k = 0 curves in Figure 2.5, and thus how they affect the balanced-growth-path values of c and k: (a) A rise in θ. (b) A downward s...

Q: Derive an expression analogous to (2.40) for the

Derive an expression analogous to (2.40) for the case of a positive depreciation rate.

Q: Consider the Ramsey model with Cobb Douglas production, y(t

Consider the Ramsey model with Cobb Douglas production, y(t) = k(t)α, and with the coefficient of relative risk aversion (θ) and capital’s share (α) assumed to be equal. (a) What is k on the balanced...