exam1-fall2008

# exam1-fall2008 - Econ407 Advanced Macroeconomics Exam 1...

• Notes
• 3

This preview shows pages 1–2. Sign up to view the full content.

Econ407 Advanced Macroeconomics Exam # 1 October 21, 2008 Instructor: Jos´ e Tessada Instructions : The exam consists of three questions, each one with five parts for a total of fifteen parts. Each part is worth two points , thus the exam has thirty points total . Please read carefully the instructions for question 3. Be concise, go straight to the point unless explicitly required to link different arguments. Write less than 10 lines per question. Writing long answers makes it harder for the grader to find the right arguments, thus restrain yourself from using too many words. Question 1 The Ramsey Model (a) Draw the equilibrium path (saddle path) and the ˙ c = 0 and ˙ k = 0 lines for the Ramsey model in the c - k space. Define c and k for this purpose. (b) In the Ramsey model with infinitely lived agents, show in the graph the golden-rule level of capital per capita? Will the economy ever achieve that level? Can the equilibrium in this economy be “dynamically inefficient”? Explain intuitively. (c) What happens with the steady state level of consumption and capital per capita if the government decides to finance a stream of government expenditures using “lump-sum” taxes (i.e., it charges a fixed amount of dollars as taxes to each household). Suppose this announcement is a surprise and it is believed to be permanent and that government budget is balanced all the time. What is the effect of this policy change on consumption, investment and capital stock? (d) What happens with the steady state level of consumption and capital per capita if the government decides to tax capital at a rate τ to finance a stream of government expenditures.

This preview has intentionally blurred sections. Sign up to view the full version.

This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern