Lecture_8_February 25

Lecture_8_February 25 - LOGISTICS Problem Set 1 posted on...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
February 25, 2010 1 L OGISTICS Problem Set 1 posted on web Due Thursday March 4, 2010 Due at 11AM, NOT 2 PM Covers material from Chapters 3, 4, and 7 Each student must submit own independently-written solutions Practice Problem Set 3 Solutions posted on web Practice Problem Set 4 next week Today: Finish Chapters 3 and 4 Consumption-Saving Model Today: Chapter 7 Government Behavior Next week: Start Chapter 8
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
February 25, 2010 2 L OGISTICS Midterm Exam (two-day): Tuesday March 9 and Thursday March 11 Covers all material from first half of semester To be held in two rooms: Last name starts with A-K JMZ 0220 Last name starts with L-Z CHM 0115 (Chemistry Building)
Background image of page 2
G OVERNMENT AND F ISCAL P OLICY IN THE C ONSUMPTION- S AVINGS M ODEL F EBRUARY 25, 2010
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
February 25, 2010 4 A D YNAMIC M ODEL OF THE G OVERNMENT A Government in the Two-Period Model So far only consumers in our two-period framework Introduce government in very simple form Exists for both periods Has spending in each period it needs to finance can be financed via Taxes Issuing government debt/assets Period 1 Period 2 b 0 b 2 Government activities during period 1: government spending and tax collection b 1 Government activities during period 2: government spending and tax collection Start of the world End of the world Notation g 1 : real government spending in period 1 g 2 : real government spending in period 2 b 0 : government asset position at beginning of period 1/end of period 0 b 1 : government asset position at beginning of period 2/end of period 1 b 2 : government asset position at beginning of period 3/end of period 2 r : real interest rate between periods
Background image of page 4
February 25, 2010 5 A D YNAMIC M ODEL OF THE G OVERNMENT Model Structure Economic activities/actions described by period budget constraints Period-1 government budget constraint Period-2 government budget constraint 1 1 0 1 (1 ) g b r b t 2 2 1 2 ) g b r b t Total expenditure in period 1: period-1 spending + wealth to carry into period 2 Total income in period 1: period-1 tax collections + income from wealth carried into period 1 (inclusive of interest) Total expenditure in period 2: period-2 spending + wealth to carry into period 3 Total income in period 2: period-2 tax collections + income from wealth carried into period 2 (inclusive of interest) 1 1 0 1 0 g b b t rb 2 2 1 2 1 g b b t rb
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 14

Lecture_8_February 25 - LOGISTICS Problem Set 1 posted on...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online