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Unformatted text preview: 5. In the lifecycle model, let u c yt , c ot 1 ln c yt 1 ln c ot 1 and F A t , K t , L t A t K t L t 1 . As in the Solow model, let y t denote the output per worker at t , so y t A t k t . (By definition, k t is the capital per old person at the start of t , and it is also the capital per worker at t .) Let 0.5, 0.7, A t 10 all t , and k 1. (1) Compute k t , for t from 0 to 3. Then compute the growth rate of k , for t from 1 to 3. (2) Compute the steady k and y . (As in the Solow model, in case A t is constant, the economy is in the steady state at t if k t k t 1 .)...
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 Fall '07
 MBIEKOP
 Macroeconomics

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