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

Exam Information

Material Type:Mid-Term
Professor:Salyer
Class:ECN 200E - Macro Theory
Subject:Economics
University:University of California - Davis
Term:Spring 2004
Keywords:
  • The Economy
  • Programming Problem
  • Representative
  • Consumption
  • Dynamic Programming
  • To
  • at (time)
  • The Environment
  • Environment
  • Growth Model
  • Preferences
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Sample Document Text

Kevin D. Salyer, Economics 200E, Spring 2004 1MidtermExam Directions: Answer all questions - Point totals for each are given in parentheses. 1. (20) Consider two representative agent, exchange economies in which one period bonds and equity are traded. Equity entitles the owner to the future stream of output (as in the Lucas tree model) while bonds cost p t units of consumption in period t and return 1 unit of consumption upon maturity in period t+1. In Economy I, the level of the endowment, x t , is random while in Economy II, the growth rate of the endowment, ? t , is stochastic. Both random variables are independently and identically distributed over time. Assume that agents instantaneous utility is logarithmic. Within this environment, answer the following: a. Write down the equations which determine the equilibrium prices of bonds and equity (i.e. it is not necessary to write down the associated dynamic programming problem - you can work straight from the appropriate nec- essary condi...

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