prelims_Macro Prelim July 2005

prelims_Macro Prelim July 2005 - University of California...

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University of California, Davis Date: July 5, 2005 Department of Economics Time: 4 hours Macroeconomics Reading Time: 20 minutes PRELIMINARY EXAMINATION FOR THE Ph.D. DEGREE Directions: Answer all questions. Short Answer Questions - Keep your answers short and concise. 1. In the Solow growth model, how does an increase in the savings rate s alter the growth rate of output per worker in the long run? What is the economic intuition behind this result? Would your answer to question ( a ) change if the capital share parameter α were equal to 1? Why or why not? 2. Government bonds do not represent net wealth to consumers in a Ramsey model, but they do represent net wealth to the current generation of consumers in an overlapping generations model. 3. What is a ‘scale e ff ect’ in an endogenous growth model? Give an example. Is this a desirable or undesirable feature? 4. The equity premium puzzle is often associated with the “risk-free rate puzzle.” What does this refer to - and what is its relevance to the equity premium puzzle?
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