Economics Dynamics Problems 155

Economics Dynamics Problems 155 - Discrete dynamic systems...

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

View Full Document Right Arrow Icon
Discrete dynamic systems 139 7. Derive the cobweb system for the price in each of the following de- mand and supply systems, and establish whether the equilibrium price is (i) stable, (ii) unstable, or (iii) oscillatory. (i) q d t = 10 3 p t q s t = 2 + p t 1 q d t = q s t (ii) q d t = 25 4 p t q s t = 3 + 4 p t 1 q d t = q s t (iii) q d t = 45 2 . 5 p t q s t = 5 + 7 . 5 p t 1 q d t = q s t 8. Suppose we have the macroeconomic model C t = a + bY t 1 E t = C t + I t + G t Y t = E t where C and Y are endogenous and I and G are exogenous. Derive the gen- eral solution for Y n . Under what conditions is the equilibrium of income, Y , stable? 9. Verify your results of question 8 by using a spreadsheet and letting I = 10, G = 20, a = 50, Y 0 = 20, and b = 0 . 8 and 1.2, respectively. For what period does the system converge on Y Y 0 within 1% deviation from equilibrium? For the same initial value Y 0 , is the period longer or shorter in approaching equilibrium the higher the value of
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/14/2011 for the course ECO 3023 taught by Professor Dr.gwartney during the Fall '11 term at FSU.

Ask a homework question - tutors are online