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**Unformatted text preview: **Graduate Macroeconomics I: Final Prof. Vollrath December 7th, 2010 Instructions: Write your answers on blank paper. Start each problem on a new sheet. Write your name and the problem number of EVERY page. Number every page. Read the whole problem before you start answering. Make sure you answer all the parts of each problem. If the problem asks you to graph something, graph it and label the axes correctly. You have three hours for the exam. Make sure you at least right down some ideas about how the problem should be answered if you cannot figure out a mathematical answer. You will need a calculator. There are a total of 100 points. Problem 1 (35 points): There are two countries, A and B . They have equal population sizes, no population growth, no trend growth in technology. Depreciation is δ = 1. Both countries are described by the OLG model, with people working in the first period of life and consuming in both periods. The utility functions are U A = (1- γ ) ln c 1 + γ ln c 2 (1) U B = (1- β ) ln c 1 + β ln c 2 (2) where 1 > γ > β > 0....

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