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

Exam Information

Material Type:Mid-Term
Class:ECN 200E - Macro Theory
University:University of California - Davis
Term:Spring 2000
  • Diagonal Elements
  • Programming Problem
  • Consumption
  • The Economy
  • Asset Pricing Model
  • Dynamic Programming
  • Markov Process
  • Behind (of)
  • Representative
  • Characterization
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Professor Salyer, Economics 200E, Spring 2000 Economics 200E: Midterm Examination Directions: Answer all questions. While the details are important, I am most interested in the intuition. 1. Consider a stochastic growth model in which output is a linear function of the beginning of period capital stock and a random technology shock. That is ttt kzy = . The shock follows a two state Markov process; the transition probability matrix is symmetric with diagonal elements 21>pi . The social planner chooses sequences for consumption and capital in order to maximize: ? ? ? ? ? ? ? ? ? ? = ? ? 1 1 1 0 1 1 t tt c E ? ? ? Given this environment, answer the following questions: a. Express the maximization problem as a dynamic programming problem. Be explicit in identifying the state and policy variables. b. Derive and interpret the associated necessary conditions. c. Make an educated guess for the form of the policy function describing optimal...

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