ECN 413
Spring 2011
Static General Equilibrium Model Exercises
Variable
Ct
ct
Nt
Kt
wt
rt
Xt
Meaning/Value
Aggregate consumption
Individual consumption
Population
Aggregate capital stock
Rental price of a worker for 1 period
Rental price of a unit of capi
ECN413
Spring 2011
Steady-state Calculation Exercise
Consider the following competitive economy. Households' preferences are given by:
Households maximize utility subject to:
Households rent labor and capital services to firms at rates wt and rt.
The aggr
Growth Facts Exercise
ECN 494 Spring 2006
The objective of this assignment is to compute the averages of the following statistics
for the post Korean War U.S. economy (1954 - 1997, quarterly data):
(i) The growth rate of per capita real output (yt+1 /yt )
Answers to the Growth Facts Exercise
ECN 494 Spring 2006
Prepared by Kathryn Birkeland
last updated April 20, 2006
DATA DESCRIPTION
Variables are $billions unless otherwise noted. All variables are current dollars except 20-22.
COLUMN NAME
1
2
3
4
5
6
7
8
DATA DESCRIPTION
Variables are $billions unless otherwise noted. All variables are current dollars except 20-22.
COLUMN NAME
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Quarter
GNP
C Durables
C Non Dur
C Services
Invest
Net Export
ECN 413
Spring 2011
Growth Facts Exercise
The objective of this assignment is to compute the averages of the following statistics for the
post Korean War U.S. economy (1954 1997, quarterly data):
i.
The growth rate of per capita real output
ii.
The growth
ECN 413
Spring 2011
Steady-state Comparison Exercise
Consider the following competitive economy. Households' preferences are given by:
Households maximize utility subject to:
Households rent labor and capital services to firms at rates wt and rt.
The aggr
Steady-state Calculation Exercise
Consider the following competitive economy. Households' preferences are given by:
Households maximize utility subject to:
Households rent labor and capital services to firms at rates wt and rt.
The aggregate production fu
ECN 413
Spring 2011
Overlapping Generations Exercise
Individuals live for two periods. An equal number are born every period. They are
endowed with time that they allocate between market production and non-market
activities.
An individual born at date t h
OLG Exercise Answers
a) Problem formulation:
max log c1 + log c 2 0.1l1 l 2
c1 = (1 ) wl1
s.t.
c2 = b
We are looking for a solution where c1 = c 2 = c and l 2 = 0 .
We know that w=1.
So, we have:
c = (1 )l1
c=b
In equilibrium: b = l1
This gives: l1 = (1 )
ECN 413
Spring 2011
Social Security Exercise
Overview: Determine the present value of Social Security to a typical ASU graduate
under the current system.
Assumptions:
1. SS annual wages for this individual from age 22 to 66 inclusive is the following:
for
ECN 413
Spring 2011
Wealth Exercise
How wealthy are you? Compute the present value of your time endowment. You will be
surprised at how wealthy you are.
Using the information below, find the present value of your time endowment. Explain your
reasoning in
ECN 413
Spring 2011
Solow Model Answers
Meaning/Value
Aggregate consumption
Individual consumption
Population
Aggregate capital stock
Rental price of a worker for 1 period
Rental price of a unit of capital for 1 period
Aggregate investment
Variable
Ct
ct
ECN 413
Malthus Exercise
Spring 2011
A MALTHUSIAN ECONOMY
Variable
Meaning / Value
Ct
Aggregate consumption of food
ct
Individual consumption of food
Nt
Number of people
Lt
Acres of land (fixed amount) = 27,000
wt
Rental price of a worker for a year
rt
Re
ECN 413
Spring 2011
Malthus Model Exercises
Ct
ct
Nt
Lt
wt
rt
Aggregate consumption of food
Individual consumption of food
Number of people
Acres of land (fixed amount) = 27,000
Rental price of a worker for a year
Rental price of an acre of land for a yea
ECN 413
Spring 2011
Static General Equilibrium Model Exercises
The model is characterized as follows. The consumer takes the wage rate w, the tax rate and
transfer T as given and solves
max log(c) + log(100-h)
s.t. c = (1- )wh + T
From the firms maximizat
ECN 413
Spring 2011
Static General Equilibrium Model Exercises
The model is characterized as follows. The consumer takes the wage rate w, the tax rate and
transfer T as given and solves
max log(c) + log(100-h)
s.t. c = (1- )wh + T
From the firms maximizat
ECN 413
Spring 2011
Steady-state Comparison Exercise: Answer Key
Consider the following competitive economy. Households' preference are given by:
Households maximize utility subject to:
Households rent labor and capital services to firms at rates wt and r
ECN 413
Spring 2011
Calibration Exercises
The purpose of this exercise is to make sure everyone understands how to calibrate a model
economy to a set of constant growth observations. Use the model primitives from the
Neoclassical Growth Model notes.
Part