prelims_Macro Prelim Sept 2005

prelims_Macro Prelim Sept 2005 - University of California,...

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University of California, Davis Date: September 8, 2005 Department of Economics Time: 4 hours Macroeconomics Reading Time: 20 minutes PRELIMINARY EXAMINATION FOR THE Ph.D. DEGREE Directions: Answer all questions; the weights for each question are given in paren- theses. Short Answer Questions 1. (25% - parts (a)-(d) are equally weighted.) Keep your answers short and concise. (a) Two modi f cations to the basic real business cycle model that have been incorporated are household production and labor adjustment costs. What is the rationale for these modi f cations? Have they been successful? (b) In a simple RBC model, what is the correlation between interest rates and the marginal productivity of capital? (c) In the Solow growth model, show how an increase in the savings rate in F uences the level and growth rate of output per worker. (d) In a linear-quadratic control problem, how does an increase in uncertainty a f ect decisions? E.g., does it promote ‘saving for a rainy day?’ Longer Answer Questions 2. (25 %) Consider a version of the Ramsey model in which population is constant and there is no exogenous technical progress. Households have preferences of the form U = Z 0 e ρt U ( C t ) dt, where ρ
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prelims_Macro Prelim Sept 2005 - University of California,...

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