Problem Set 5
Eric Li and Brennan King
May 27, 2014
a. The transient states are represented by the set cfw_s 2 ,s 4 ,s 6 . The ergodic set is cfw_s 1 ,s 3 ,s 5 .
b. Let X be the transition matrix. Let q 1 = (1/6, 1/6, 1/6, 1/6, 1/6, 1/6). T
The rst thing a student must be comfortable with is writing down a problem under a sequential form
containing : the objective function to maximize, the constraints on the problem and the laws of motion.
Then one has to be able to ide
Problem Set 4
May 20, 2014
In class we dened the uniform metric as a function : S S R, where S is the set of functions from some
X to R, as (v, w) = maxxX |v(x) w(x)|. We will show that the uniform metric satises the properties o
Econ 202 Honors: Solutions for Pset 6
a. Let pi and xi be the prices and payos of the Arrow-Debreu security in state i. Also, let i be
the probability that state i occurs in period 2. Then the agents sequential budget constraint
is given by
c1 + pA xA
Section 1 Aggregates
The objective of this section was to level the eld so that every student would have a basic understanding
of the concepts used in the class. The important concepts for the midterm are :
Denition of GDP : the total value of nal goods
ECON 20210: Problem Set 1
April 10, 2014
GDP and Detrending
The Excel le used for all data processing in this exercise is attached to this problem set as a separate appendix. All
values were rounded (for purposes of clarity) to ve signic
Problem Set 2
April 24, 2014
We show that U (C ) = 1 eC has constant absolute risk aversion.
A(C ) =
U (C )
U (C )
which is a constant.
We now want to show that if a function exhibits CARA then it has to be exponential.
Econ 202 Honors Pset 3: Hyun Soo Doh
1. 1.1 A competitive equilibrium is an allocation of consumption, labor and capital cfw_c, n and a set of
relative prices to consumption of labor and capital cfw_w, r that satisfy
(i) Given (w, r) and (K, nd ), the con