II. Growth
(chapters 1, 3, and 2)
Growth *economies grow
*we want to know why and how they grow
Common Questions: *Why do some countries have higher income per capita than others?
*Why do some countries have higher growth rates than others?
*Do poor count
Model's Cyclical Predictions:
What do output fluctuations look like
in this model?
If our production function is
1-
Y = K A L
t
t
t
t
then:
ln Y = ln K 1- ln A ln L
t
ECON 402 lecture slides 14
t
t
t
page 1
K = sY
t
t-1
,
ln N =Nnt
L =l N ,
t
t
t
ln A
Name
Student #
University of Waterioo
Department of Economics
ECON 492
Prof. Kate Rybczynski
Term Test 2
June-EirEB-l-s
SANA-cfw_cams
Instructions:
N0 CALCULATORS.
it is a ciosed book exam and no cheet sheets" are permitted.
TURN OFF ALL CELL PHONES!
You
On the Job Search: W framework
Worker's decision comes down to a
stopping rule: wR
How do we determine the
reservation wage?
What is reservation wage?
wR is that wage where the worker is
indifferent between working and not
working.
It is the lowest value
Decision making under
Uncertainty
Household decisions will depend on
shocks.
Euler will have current consumption
related to expected future outcomes
402 lecture slides 13
page 1
Ramsey model with uncertainty
Household consumption optimization
is given by:
2. Search & Matching
Bargaining Framework
Workers and firms meet according to
some process and divide the surplus
of the match.
402 lecture slides 17
page 1
Process:
Workers and firms meet at a given
rate and discover the payoff(surplus)
of the match when
Name_
Student # _
University of Waterloo
Department of Economics
ECON 402
Prof. Kate Rybczynski
Term Test 1
June 1, 2016
Instructions:
NO CALCULATORS.
It is a closed book exam and no cheet sheets are permitted.
TURN OFF ALL CELL PHONES!
You have 40 minute
Review
1. Tools (know them)
2. Growth
Basic Solow-Swan
Solve: find steady state where k=0
constant k* gK=gY=g+n = constant; all economies
converge to k*. Note: k=K/AL, so K, A and L are not constant, just the ratio of K to AL is constant.
Comparative Dyn