final_exam

# final_exam - Economics 202A Final Exam Instructions You...

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

Economics 202A Final Exam December 15, 2007 Instructions: You have 1 hour and 35 minutes. Answer all 3 questions, each of which carries an equal weight. Notice that within question 2, you have a choice between two options. There is no extra credit for picking both of those options { you may only pick one. Take the °rst 5 minutes to look over all 4 pages of the exam before you start. That way you can better pace yourself. If you get stuck, go on to something you can answer more easily and return to the di±cult bits later on. Good luck, and happy holidays! 1. A representative consumer maximizes Z 1 0 u [ c ( t )] e ° °t d t subject to _ a = y + ra ° c; a (0) given ; where y and r are constant through time, y is perishable output, and a rep- resents a stock of interest-bearing real °nancial assets. We do not necessarily impose that the subjective discount rate ° is equal to the market real interest rate r . A no-Ponzi condition also is imposed on the problem. (a) Use the Maximum Principle to write down the necessary conditions for this maximization problem, based on the Hamiltonian. (b) For the isoelastic function u ( c ) = c 1 ° 1 ° ° 1 1 ° 1 ± ; derive from the Maximum Principle °rst-order conditions the Euler equation relating the proportional growth rate of consumption c to the parameter ± and the di±erence r ° ° .

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

View Full Document
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