Introduction to Money
K How does money fit into modern macro models?
- Money M = = nominal units issued by the government. Price level p. Purchasing power 1/p.
- Consider discrete periods: Household hold money and interest-bearing assets:
ct + at
Dynamic Properties of the Optimal Growth Model
I. Graphical Analysis
c = 1 (r n g ) = 1 ( f ' (k ) g )
k = f (k ) c (n + g + )k
Applications of Growth Theory I:
HObjective: Use empirical data on output, capital stocks, and labor supply, to interpret history
(accounting), to compare across countries, or to make projections.
H.A.@2A@<[email protected]?C.A6<;@(Yt, Kt, Lt
Digression: Discrete-Time Optimization
[For now: As motivation for continuous time. For later: Preview of discrete-time macro.]
U = t1u(ct ) = u(c1 ) + u(c2 ) + .+ T 1u(cT )
Collection of Practice Problems
In previous years, students have often asked me about practice problems in addition to the problem
sets. Here is a collection. Some will be assigned for the weekly problem sets. I hope the others are
Growth Theory: Broad Outline
1. Foundation: The Solow Model. Romer ch.1.
- Basic version: Mechanics of production, savings, and capital accumulation.
- Take technological progress for granted. Take population growth as given.
- Extended versions: