208-2011-L4

208-2011-L4 - Econ 208 Marek Kapicka Lecture 4 The Effects...

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Unformatted text preview: Econ 208 Marek Kapicka Lecture 4 The Effects of Gov’t Spending Where are we? n A Basic Intertemporal Model n A) Consumer Optimization n B) Market Clearing n C) Adding capital stock n D) Welfare Theorems n E) Infinite horizon E) Infinite Horizon n Shortcomings of the previous model: n 2 periods are arbitrary n Solution: Infinite number of periods n Solve the Pareto Problem given ) 1 ( ) ( . . ) ( max 1 } , { 1 K K K F K C t s C U t t t t t t t K C t t δ β- + = + + ∞ = ∑ + E) Infinite Horizon Euler Equation again and Steady State n Consumption satisfies: n Steady State: ) ( ] 1 ) ( [ ) ( 1 1 + + ′- + = ′ t t K t c U K F c U δ β 1 1 ) ( ] 1 ) ( [ 1 ) ( ] 1 ) ( [ ) (- + =- + = ′- + = ′ δ β δ β δ β ss K ss K ss ss K ss K F K F C U K F C U Where are we? n Introduction: A model with no Government n The Effects of Government Spending n Government Taxation and Government Debt n Fiscal and Monetary Policy n Optimal Monetary Policy n Financial Intermediation n Current Account Determination n Fiscal Deficits and Current Account Roadmap n Government Expenditures...
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208-2011-L4 - Econ 208 Marek Kapicka Lecture 4 The Effects...

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