Final4010_2008 - Final Exam &Econ 4010 2 March...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

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

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

Unformatted text preview: Final Exam &Econ 4010 2 March 2009 Department of Economics York University Part A: do any three of the six problems below 1. The Solow model [10 marks] Consider the Solow model, with Cobb-Douglas production. The capital stock per e/ective worker evolves over time according to & k = sf ( k ) & ( n + g + & ) k , where f ( k ) > and f 00 ( k ) < . The steady-state level of k (where & k = 0 ) is denoted k , and the interest rate is given by r = f ( k ) & & . Consider a poor economy, where k lies below k . In this economy, will r be increasing or decreasing over time? (In other words, what is the sign of & r when k < k ?) [10 marks] 2. The Ramsey model [10 marks] Consider a Ramsey model with a general neoclassical production function. It can be shown that the dynamics of consumption, c , are given by the so-called Euler equation: & c c = f ( k ) & & g , where f ( k ) is the real interest rate (assuming that capital depreciation is zero). The dy- namics of k are given by & k = f ( k ) & c & ( n + g ) k . We assume that f ( k ) > and f 00 ( k ) < . It can be shown that there exists a steady-state level of k , denoted k , such that & c > for k < k and & c < for k > k . How does k change when increases (agents become less patient)? That is, nd the sign of @k =@ . [10 marks] 3. Endogenous growth [10 marks] Consider an endogenous growth model. Total output, Y , is produced using Y = A " [1 & a L ] L & , where and " are strictly positive exogenous parameters, A is the level of technology (the number of ideas), L is the total labor force, and 1 & a L is the fraction of workers employed in goods production. Note that Y , L , and A depend on time (although we suppress the t ), but a L , , and " do not depend on time. New ideas, & A , are produced using &...
View Full Document

Page1 / 5

Final4010_2008 - Final Exam &Econ 4010 2 March...

This preview shows document pages 1 - 2. Sign up to view the full document.

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