prelims_Macro Prelim July 2006

prelims_Macro Prelim July 2006 - University of California,...

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University of California, Davis Date: July 3, 2006 Department of Economics Time: 4 hours Macroeconomics Reading Time: 20 minutes PRELIMINARY EXAMINATION FOR THE Ph.D. DEGREE Directions: Answer all questions. Part 1 collectively counts for 25 percent of the grade. Each of the questions in Part 2 count for 25 percent of the grade. Part 1: Short Answer Questions - Keep your answers short and concise. 1. The solution to a linear-quadratic Gaussian dynamic program exhibits ‘cer- tainty equivalence.’ State precisely what that means. 2. What is dynamic e ciency? Can the equilibrium of the Ramsey-Cass-Koopmans model be dynamically ine cient? Why or why not? 3. In a simple RBC model with log preferences and 100% depreciation, consump- tion is typically a constant fraction of income. This result is invariant to whether the technology shocks are temporary (i.i.d.) or persistence (positively autocorrelated). Is this a contradiction to the permanent income hypothesis? 4. Suppose that consumption growth follows the process: c t +1 c t c exp © ε c,t +1 σ 2 c / 2 ª where ε c,t is assumed to be a normally distributed i.i.d. innovation with mean of zero. The return on riskless bonds must satisfy the standard intertemporal
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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.

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prelims_Macro Prelim July 2006 - University of California,...

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