exam-02 - Midterm Exam 2 Viktor Tsyrennikov Graduate...

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Midterm Exam 2 Viktor Tsyrennikov Graduate Macroeconomics October 28, 2011 The exam is designed to be fnished in 80 minutes. There are 2 problems, worth 50 and 50 points respectively. Read careFully the whole problem beFore answering. Show your work – guessed answers will not be accepted. Name: 1
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Question 1. Macro Finance Consider the following economy populated by 2 agents with logarithmic preferences. The exogenous state s t that describes the economy’s evolution takes two values with the equal probability. Endowments are: ( e 1 ( s ) , e 2 ( s )) = b (0 . 5 , 1 . 5) s = 1 (0 . 5 , 0 . 5) s = 2 . The economy starts in state s 0 = 1. Financial markets trade a full set of Arrow securities. Both agents start with zero initial wealth. a) De±ne the competitive equilibrium with sequential trading. b) Compute the CE with sequential trading. c) “Price” a claim to the aggregate endowment (stock market index) and a risk free bond. d) Suppose that alternatively markets trade a stock market index and
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This note was uploaded on 11/10/2011 for the course ECONOMICS 601 taught by Professor Viktortsyrennikov during the Spring '11 term at Cornell University (Engineering School).

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exam-02 - Midterm Exam 2 Viktor Tsyrennikov Graduate...

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