# MACRO HW3 - whereas.75.9 and.95 initially have a positive...

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HW # Anvar Suyundikov 2. a) “OUTPUT” Diagram: If theta is less that 5, output returns to zero but takes longer to return as theta increases. If theta is equal to five, it goes horizontal at 2. If theta is ten capital continues increasing and does not return to the steady state. “CONSUMPTION” Diagram: -For theta equal to .5, 1, and 2, consumption begins increasing and then approaches zero. As theta increases from .5 to 2, a larger theta has a smoothing effect. Theta=5 still has an increased smoothing affect but approaches .5. For theta=10, sharp increase with consumption approaching infinity as t approaches infinity. “CAPITAL” Diagram: -As with consumption and output, theta equal to .5, 1, and 2, capital eventually approaches 0. The other values of Theta also act similarly to those in consumption and output. “TECHNOLOGY” Diagram: -Not dependent on change in theta, therefore, exactly the same for all theta. b) “OUTPUT” Diagram: - Rho equal to 0, .25, and .5 has a negative slope for all the domain,
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Unformatted text preview: whereas .75, .9, and .95 initially have a positive slope and then goes down to zero like the others. As rho increased, maximum output level also increased and the affects of the shock lasted longer “CONSUMPTION” Diagram:-For all Rho observed, as rho increased, maximum output level also increased and the affects of the shock lasted longer. For Rho equal to 0, the slope was negative for all the domain and for all the others, slope was initially positive and then negative. “CAPITAL” Diagram:-For all rho, it begins with a positive slope and then a negative slope as it approaches zero. As Rho increases, maximum output increases and the time to return to the steady state increases. The initial slope is greater for smaller values of rho which means as rho increases, the shock has a slower affect on capital. “TECHNOLOGY” Diagram:-As Rho increases, the absolute value of the slope decreases. Note: all shocks began at one regardless of rho as anticipated....
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