problem_set2 - taxes of amount G ( t ) per unit of eective...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
University of Toronto Mississauga Department of Economics ECO 325H: Advanced Economic Theory - Macro Prof. Kambourov Problem Set 2 Tuesday, October 13, 2009 1. Consider the Ramsey-Cass-Koopmans economy described in Chapter 2. Initially, the economy is on a balanced-growth path. Then, suppose that we introduce a government which consumes G ( t ) per unit of effective labor per unit of time (i.e. every period). Assume that this government consumption is financed by lump-sum
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: taxes of amount G ( t ) per unit of eective labor per unit time; thus the government always runs a balanced budget. (a) Write down the households budget constraint. (b) Determine whether the c = 0 line would change or not. (c) Determine whether the k = 0 line would change or not. (d) Discuss, using a graph, the transition from the initial balanced-growth path to the new balanced growth path. 2. Romer 2.6 1...
View Full Document

Ask a homework question - tutors are online