Lecture 14

Lecture 14 - 1 Econ 102 Fall 2008 Lecture 14 The Stock...

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Unformatted text preview: 1 Econ 102 Fall 2008 Lecture 14 The Stock Market 2 Plan of Lecture Review Asset Pricing Model Add a Labor market What determines the value of the stock market in a classical model? What Determines the Value of the Stock Market in the Keynesian Search Model 3 Environment Many identical firms (normalize to 1) There is one non reproducible unit of capital (a tree) Firm owns the tree Cobb-Douglas technology Classical labor market 4 Environment Many identical households (normalize to 1) Each household supplies one unit of labor Household owns the firm Logarithmic utility 5 Numeraire We choose labor as the numeraire This is not the same as lecture 8 Initially we will keep track of everything in dollars 6 Production a b t t t t t t t p A K L w L =- Money profit Tree (1 unit) Labor Money wage 1 a b + = Technology Money price 7 The Firm The firm chooses L to maximize profit Firm takes w and p as given t t t t y w b L p = t t t t t p y w L =- 8 Distribution of Income t t t t w L bp y = ( 29 1 t t t b p y =- Labor gets the share b Capital gets the share 1-b 9 Dividends What is earned by the owner of the firm?...
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This note was uploaded on 09/27/2009 for the course ECON 102 taught by Professor Serra during the Fall '08 term at UCLA.

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Lecture 14 - 1 Econ 102 Fall 2008 Lecture 14 The Stock...

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