This preview shows pages 1–2. Sign up to view the full content.
Midterm Exam — Econ 413/513
13 March 2002
Department of Economics
Concordia University
1. The Solow model [10 marks]
Consider the standard Solow model, with CobbDouglas production. The capital stock per e
f
ective
worker evolves over time according to
•
k
=
sk
α
−
(
n
+
g
+
δ
)
k
.
Let the steadystate level of
k
(where
•
k
= 0) be denoted
k
∗
. The notation is otherwise standard.
(a) Does an increase in the rate of population growth,
n
, lead to a rise or a fall in
k
∗
?
NB! You do not
need to motivate your answer.
[5 marks]
(b) Consider a poor country where
k
lies below
k
∗
. In this economy, will
k
be growing or falling over
time? (In other words, what is the sign of
•
k
if
k<k
∗
?)
NB! You do not need to motivate your answer.
[5
marks]
2. The Ramsey Model [10 marks]
Consider a Ramsey Model with CobbDouglas production. It can be shown that the dynamics of con
sumption,
c
, is given by the socalled Euler equation:
•
c
c
=
α
k
α
−
1
−
ρ
−
θ
g
θ
where (recall from class)
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview. Sign up
to
access the rest of the document.
 Spring '09
 ZAFARKAYANI
 Economics

Click to edit the document details