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What is user cost of capital and based on the equation explain the components of user cost of capital (Marks: 5 points) rK(t)=r(t)pK(t)+pK(t)pK(t) b) Q(t)
What is user cost of capital and based on the equation explain the components of user cost of capital (Marks: 5 points) rK(t)=r(t)pK(t)+pK(t)pK(t) b) Q(t) is a co-state variable in the model. C) Explain the intuition of the expression and why it is important for optimal control (Marks: 6 point) q(t)==ter(t)(K())d. (K(t))=rq(t)q(t). Place the relevance of Q(t) in the Hamiltonian to solve for optimal capital accumulation and intuitively tell the relevance of Q(t) in the objective function? (Mark: 5 Point) =t=0ert[(K(t))K(t)I(t)C(I(t))]dt, D)Why the final condition is important to solve the model? If we get first two conditions correct, what does the third condition serve us? ( 3 points) b) Explain the grpah and why it converges to Point C using the expression (Marks : 6 points) 1+C(I(t))=q(t). E) How does the saddle point change if there is an increase in the interest rate (r). Explain the intuition and use the graph to explain. (Marks : 6 points) (Hint : use the equation (K(t))=rq(t)q(t). What is user cost of capital and based on the equation explain the components of user cost of capital (Marks: 5 points) rK(t)=r(t)pK(t)+pK(t)pK(t) b) Q(t) is a co-state variable in the model. C) Explain the intuition of the expression and why it is important for optimal control (Marks: 6 point) q(t)==ter(t)(K())d. (K(t))=rq(t)q(t). Place the relevance of Q(t) in the Hamiltonian to solve for optimal capital accumulation and intuitively tell the relevance of Q(t) in the objective function? (Mark: 5 Point) =t=0ert[(K(t))K(t)I(t)C(I(t))]dt, D)Why the final condition is important to solve the model? If we get first two conditions correct, what does the third condition serve us? ( 3 points) b) Explain the grpah and why it converges to Point C using the expression (Marks : 6 points) 1+C(I(t))=q(t). E) How does the saddle point change if there is an increase in the interest rate (r). Explain the intuition and use the graph to explain. (Marks : 6 points) (Hint : use the equation (K(t))=rq(t)q(t)
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