This preview shows page 1. Sign up to view the full content.
Econ 102
Roger E A Farmer
Fall 2008
Assignment for Week Five
1.
Consider the following difference equations.
a)
1
21
tt
xx
−
=+
b)
1
0.5
2
−
=−
c)
1
−
+
d)
1
0.5
2
−
−
e)
1
1
−
f)
1
2
−
−
g)
1
x
x
−
=
In all cases
t
x
can be positive or negative. For each equation
i)
Draw a graph of the equation and plot the line
1
x
x
−
=
on the same graph.
ii)
Find the steady state (if it exists). If not – say why.
iii)
If a steady state exists say if it is stable or unstable.
iv)
Draw a trajectory that starts at
0
t
x
=
and plot where it will go on your graph.
2.
In a two period economy there are three possible outcomes in period 2; A, B or C.
The price of three arrow securities are given by
0.2,
0.6,
0.1
Ab
C
QQ
Q
==
=
a) How much would you expect the following assets to sell for in the market? Explain
This is the end of the preview. Sign up
to
access the rest of the document.
 Fall '08
 Serra
 Macroeconomics

Click to edit the document details