AK_RQ - Review Questions: AK Models Econ720. Fall 2009....

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Review Questions: AK Models Econ720. Fall 2009. Prof. Lutz Hendricks 1 Growth model with two capital goods Consider the following endogenous growth model with two capital goods. Households: There is a single, representative household who lives forever. Pref- erences over consumption streams are given by P 1 t =0 t u ( c t ) . Households own two capital goods, K 1 and K 2 . The income obtained from renting these capital goods to Firms: Production takes place in two sectors ( i = 1 ; 2 ). The resource constraints for sector 1 is A 1 F 1 ( K 11 t ; K 12 t ) + (1 ± ) K 1 t = K 1 t +1 + c t where K ist is the amount of capital of type s used in sector i and K st = K 1 st + K 2 st is the total amount of capital good s used in both sectors. The resource constraint for sector 2 is similar, except that good 2 is not consumed: A 2 F 2 ( K 21 t ; K 22 t ) + (1 ± ) K 2 t = K 2 t +1 production functions exhibit constant returns to scale. purchase and rental prices of the various goods consistently. Good 1 is the numeraire.
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This note was uploaded on 10/29/2009 for the course ECON 720 at UNC.

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AK_RQ - Review Questions: AK Models Econ720. Fall 2009....

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