Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please answer this question this is related to advanced macro economic please answer a,b,c,d and e part and do not copy from old answer so
please answer this question this is related to advanced macro economic please answer a,b,c,d and e part and do not copy from old answer so I post this question for third time
2. In an infinite horizon economy, the utility function of representative households is: u(c) = log(c) (1) and the discount factor of households' utility stream over time is 3. The production technology in this economy follows: F(kt, 1) = AkoT-0 (2) and the depreciate rate of capital in this economy equals to 6. Consider that the representative households make decision as a social planner for the whole economy, that is to maximize their discount utility stream over infinite time horizon, given initial capital stock ko. (a) Set up the problems for the social planners. (10 points) (b) Find out the sufficient conditions for the social planner to obtain the optimal consumption and saving decision over time. (10 points) (c) Interpret all the conditions in (b) with an economic intuition. (10 points) (d) Solve for the steady state consumption and capital stock in this economy, denoted as cand ks. (5 points) (Hints: At steady state, C = C++1 = C88 and kt = kt+1 Kas should hold. There is no exact parameter value, so the analytical solution is more than enough!) = (e) Bonus question: Log-linearize the system around steady state.(10 points) 2. In an infinite horizon economy, the utility function of representative households is: u(c) = log(c) (1) and the discount factor of households' utility stream over time is 3. The production technology in this economy follows: F(kt, 1) = AkoT-0 (2) and the depreciate rate of capital in this economy equals to 6. Consider that the representative households make decision as a social planner for the whole economy, that is to maximize their discount utility stream over infinite time horizon, given initial capital stock ko. (a) Set up the problems for the social planners. (10 points) (b) Find out the sufficient conditions for the social planner to obtain the optimal consumption and saving decision over time. (10 points) (c) Interpret all the conditions in (b) with an economic intuition. (10 points) (d) Solve for the steady state consumption and capital stock in this economy, denoted as cand ks. (5 points) (Hints: At steady state, C = C++1 = C88 and kt = kt+1 Kas should hold. There is no exact parameter value, so the analytical solution is more than enough!) = (e) Bonus question: Log-linearize the system around steady state.(10 points)Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started