Economics 10b Study Guide - Final Guide: Money Supply, Risk Aversion, Discounting
13 Dec 2018
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Please use a separate blue book for each question and write the. Question number on the front of the blue book. Please put your exam number on each book. Please do not write your name on your blue books. Problem 1 (growth model; 24 minutes): consider the following growth model: Finally, note that 0 1 : write down the bellman equation, solve the bellman equation by guessing a solution. Speci cally, start by guessing that the form of the solution is. Solve for parameters and : derive the optimal policy function. Problem 2 (true/false/uncertain; 24 minutes): this question is graded on the quality of your explanation (not on the one-word answer itself). When a statement is false, you"ll get full credit only if you provide a counter-example: assume that (i) consumers have rational expectations, and, (ii) the prod- uct of the gross interest rate and the discount factor is unity.
