Q1. State the definition of the Golden Rule kGR Q2. The goods market clearing condition is given by G; + K+1 - (1– 8)K; = Y; (1) where C; = L¿cit + Lt-1C2t-1- Explain in words what equation (1) means. Q3. From (1), derive Ct + kt+1(1 +n) – (1 – 8)k = Yt. (2) (The small letter stands for per capita terms.) Q4. From (2), derive the steady-state level of per-capita consumption c as a function of k. (Hint: the steady-state level of per-capita income is given by y = Ak".) Q5. Derive the two values of k that sets the steady-state level of per-capita consumption c to zero. Q6. Verify that for k > 0, d2c <0. dk2 (Hint: We assume that a E (0,1)). Q7. Derive the Golden Rule k GR 08. Draw the steady-state level of per-capita consumption c in (k, c)-space (i.e., k is put on the X-axis, while c is put on the y-axis).

Q1. State the definition of the Golden Rule kGR Q2. The goods market clearing condition is given by G; + K+1 - (1– 8)K; = Y; (1) where C; = L¿cit + Lt-1C2t-1- Explain in words what equation (1) means. Q3. From (1), derive Ct + kt+1(1 +n) – (1 – 8)k = Yt. (2) (The small letter stands for per capita terms.) Q4. From (2), derive the steady-state level of per-capita consumption c as a function of k. (Hint: the steady-state level of per-capita income is given by y = Ak".) Q5. Derive the two values of k that sets the steady-state level of per-capita consumption c to zero. Q6. Verify that for k > 0, d2c <0. dk2 (Hint: We assume that a E (0,1)). Q7. Derive the Golden Rule k GR 08. Draw the steady-state level of per-capita consumption c in (k, c)-space (i.e., k is put on the X-axis, while c is put on the y-axis).

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.12P

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