Past Exam for ECN 200E - Macro Theory at UC Davis (UCD)

Exam Information

Material Type:Final
Class:ECN 200E - Macro Theory
University:University of California - Davis
Term:Spring 2007
  • The Economy
  • Diagonal Elements
  • Explanation
  • Programming Problem
  • Consumption
  • Implications
  • No Correlation
  • Preferences
  • Dynamic Programming
  • Productivity
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Sample Document Text

K. Salyer, Economics 200E, Spring 2007 1 Final Exam Directions: Answer all questions - they are equally weighted. Good luck and enjoy your summer after the prelims. 1. Consider a two-state version of the Lucas tree model; that is, the endowment is assumedtofollowatwo-stateMarkovprocesswithpossiblerealizationsx1 < x2 and symmetric transition probability matrix with diagonal elements  = 1=2. Suppose agents in this economy trade one- and two period bonds that cost p1t and p2t units of consumption, respectively, and return one unit of consumption upon maturity. Dene the term premium as the difference between the expected return from selling a two-period bond after holding it for one-period and the certain return from a one-period bond. What is the sign of this term premium? Provide an explanation for your answer. 2. Consider the following version of the Stockman CIA model: The economy is populated by identical agents that have preferences given by: 1X t=0 t [U (ct) + W (1 ht)] where ct is ...

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