5. Use the high and low growth states and the transition matrix given (102) in section 4.5...

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5. Use the high and low growth states and the transition matrix given (102)⇒ in section 4.5 to solve for the price-dividend ratios for equities. What does the Lucas model have to say about the volatility of stock prices? How does the behavior of equity prices in the monetary economy differ from the behavior of equity prices in the barter economy?

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