prelims_Macro Prelim ANSWERS Sept 2006

prelims_Macro Prelim ANSWERS Sept 2006 - 1 Answers to...

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

View Full Document Right Arrow Icon
1 Answers to Questions 3 and 6, Sept 06 Macro Prelim 3. This was a simple question that required a recognition that the labor- leisure choice in an RBC framework will be characterized by a variant of the following necessary condition: U h U c = wage If labor ( h ) is constant, this implies that the numerator in the marginal rate of substitution is also constant (assuming separable utility). Then it is required that the change in the marginal utility of consumption is equal to the growth rate in the real wage. Given that, in a balanced growth path, the wage and consumption are both growing at the rate of technological progress, this implies that the elasticity of the marginal utility of consumption must be one. 6. Moving straight to the dyanamic programing representation, we have V ( k t , ν t )=m a x ³ c t θ ( c t ν t ) 2 + β E ( V ( k t +1 , ν t +1 )) ´ + λ t ( Ak t + k t c t k t +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 02/09/2010 for the course ECON 200D taught by Professor Pontusrendahl during the Winter '06 term at UC Davis.

Page1 / 2

prelims_Macro Prelim ANSWERS Sept 2006 - 1 Answers to...

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