A closed-form solution of the ramsey model this follows, Ask an Expert

Economics

A closed-form solution of the Ramsey model. (This follows Smith, 2006.) Consider the Ramsey model with Cobb-Douglas production, y(t) = k (t)a, and with the coefficient of relative risk aversion (?) and capital's share (a) assumed to be equal.

(a) What is k on the balanced growth path (k*)?

(b) What is c on the balanced growth path (c*)?

(c) Let z(t) denote the capital-output ratio, k (t)/y(t), and x (t) denote the consumption-capital ratio, c (t)/k(t). Find expressions for z?(t) and x?(t)/x (t) in terms of z, x, and the parameters of the model.

(d) Tentatively conjecture that x is constant along the saddle path. Given this conjecture:

(i) Find the path of z given its initial value, z(0).

(ii) Find the path of y given the initial value of k, k (0). Is the speed of convergence to the balanced growth path, d ln[y(t) - y*]/dt, constant as the economy moves along the saddle path?

(e) In the conjectured solution, are the equations of motion for c and k, (2.24) and (2.25), satisfied?

View complete question

Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M91613893

Have any Question?Write your Review or question?

Related Questions in Microeconomics

Question give some examples of third-degree price

Question: Give some examples of third-degree price discrimination. Can third-degree price discrimination be effective if the different groups of consumers have different levels of demand but the same price elasticities? ...

Question there has been a marked decline in unionizationa

Question: There has been a marked decline in unionization. A. describe 3 strategies unions have used to stem the decline in their membership. B. Explain and show graphically why an efficient contract requires the union t ...

Question a single-price monopolist whose marginal costs are

Question: A single-price monopolist whose marginal costs are zero receives a government subsidy of $1 for every unit of output it produces, but it is free to choose its price. Will the monopolist now produce an output at ...

Question what happens to a firms expansion path if one of

Question: What happens to a firm's expansion path if one of its inputs permanently falls in price while the price of the other remains constant? The response must be typed, single spaced, must be in times new roman font ...

Question suppose a country has 100 inhabitants the

Question: Suppose a country has 100 inhabitants. The population can be divided into two categories: employed and unemployed. In any given year, the transition probabilities from employed to employed is 0.95 and from unem ...

Quesiton suppose the dollar is overvalued by 20 and the

Quesiton: Suppose the dollar is overvalued by 20% and the Secretary of the Treasury announces that he hopes it will soon return to equilibrium. How would this announcement affect your sales if you were in the following b ...

Question what is profit management how is it different from

Question: What is profit management? How is it different from cost or loss management? How does Mises' system of dividing components of business help direct profits to efficient units? How does this relate to decision ri ...

Question assume that x is produced in a perfectly

Question: Assume that X is produced in a perfectly competitive industry where firms that currently operate and potential competitors both have identical cost curves. Current output is 1 million units a year. What happens ...

Question how does an economys choice about how many of its

Question: How does an economy's choice about how many of its resources to devote to capital goods production as compared to consumer goods production affect its curent standard of living and its future standard living? T ...

Question very time we have to make a choice we are faced

Question: Very time we have to make a choice we are faced with an opportunity cost. Using an example in your professional life, identify a situation where you were presented with a choice, the opportunity cost of the cho ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Microeconomics Expert