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

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

View Full Document Right Arrow Icon
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 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 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- 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 ± ; relating the proportional growth rate of consumption c to the parameter ± and the di±erence r . 1
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 08/01/2008 for the course ECON 202A taught by Professor Akerlof during the Fall '07 term at Berkeley.

Page1 / 4

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

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online