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    Homework 2 Part 1 Draft

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    steve peteson
    The document provides instructions to find the steady state capital stock per effective unit of labor (k*) and consumption per effective unit of labor (c*) in the Ramsey model given a log utility function for consumption C(t). It lists the equations needed to solve for k* and c*, including the production function and equations for the dynamics of capital and consumption. It then shows the steps to solve for k* and c*, finding k* is a function of the discount rate, growth rate, and depreciation rate divided by the exponent on capital in the production function, and c* is equal to output from capital k* minus capital depreciation and growth.

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    © All Rights Reserved
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    Homework 2 Part 1 Draft

    Uploaded by

    steve peteson
    32 views2 pages
    The document provides instructions to find the steady state capital stock per effective unit of labor (k*) and consumption per effective unit of labor (c*) in the Ramsey model given a log utility function for consumption C(t). It lists the equations needed to solve for k* and c*, including the production function and equations for the dynamics of capital and consumption. It then shows the steps to solve for k* and c*, finding k* is a function of the discount rate, growth rate, and depreciation rate divided by the exponent on capital in the production function, and c* is equal to output from capital k* minus capital depreciation and growth.

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    ramsey model

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    The document provides instructions to find the steady state capital stock per effective unit of labor (k*) and consumption per effective unit of labor (c*) in the Ramsey model given a log utility function for consumption C(t). It lists the equations needed to solve for k* and c*, including the production function and equations for the dynamics of capital and consumption. It then shows the steps to solve for k* and c*, finding k* is a function of the discount rate, growth rate, and depreciation rate divided by the exponent on capital in the production function, and c* is equal to output from capital k* minus capital depreciation and growth.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    32 views2 pages

    Homework 2 Part 1 Draft

    Uploaded by

    steve peteson
    The document provides instructions to find the steady state capital stock per effective unit of labor (k*) and consumption per effective unit of labor (c*) in the Ramsey model given a log utility function for consumption C(t). It lists the equations needed to solve for k* and c*, including the production function and equations for the dynamics of capital and consumption. It then shows the steps to solve for k* and c*, finding k* is a function of the discount rate, growth rate, and depreciation rate divided by the exponent on capital in the production function, and c* is equal to output from capital k* minus capital depreciation and growth.

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    Homework

    2 Due 4/19 (part 1)


    Please find k* and c* in the Ramsey model if u(C(t))=ln(C(t)) where C(t) is consumption per person. k* is
    capital stock per effective units of labor in steady state and c* is consumption per effective units of labor in
    steady state. The production function is F(K(t),A(t)L(t))=K(t)^(alpha)(A(t)L(t))^(1-alpha).

    You may start right before we plugged in theta(c) for -C u''(C)/u'(C) or you can start from the beginning.

    You may turn this assignment in individually.

    𝑒 "#$ 𝑢& '𝐶(𝑡), = 𝜆(𝑡) ∗ 𝑒𝑞. 1 ∗


    −𝜆̇(𝑡)
    4𝐹′'𝐾(𝑡), 𝐴(𝑡)𝐿(𝑡), − 𝛿= = ∗ 𝑒𝑞. 2 ∗
    𝜆(𝑡)
    𝐾̇ (𝑡) = 𝐹'𝐾(𝑡), 𝐴(𝑡)𝐿(𝑡), − 𝐶 (𝑡)𝐿(𝑡) − 𝛿𝐾(𝑡) ∗ 𝑒𝑞. 3 ∗

    𝑢'𝐶(𝑡), = ln(𝐶 (𝑡))


    𝑢& '𝐶(𝑡), = 𝐶(𝑡)"C
    𝑢&& '𝐶(𝑡), = −𝐶(𝑡)"D

    𝐶̇ (𝑡) 𝑢&& '𝐶(𝑡), 𝜆̇(𝑡)


    𝜌− 𝐶 ( 𝑡 ) = −
    𝐶 (𝑡) 𝑢& '𝐶(𝑡), 𝜆 (𝑡 )

    𝑢&& '𝐶(𝑡), −𝐶(𝑡)"D


    𝐶 ( 𝑡 ) = 𝐶 (𝑡) = −1
    𝑢& '𝐶(𝑡), 𝐶(𝑡)"C

    𝐶̇ (𝑡) 𝜆̇(𝑡)
    𝜌+ =−
    𝐶 (𝑡 ) 𝜆 (𝑡 )
    𝐶̇ (𝑡)
    4𝐹′'𝐾(𝑡), 𝐴(𝑡)𝐿(𝑡), − 𝛿= = 𝜌 +
    𝐶 (𝑡 )
    𝐶̇ (𝑡)
    = 𝐹′'𝐾(𝑡), 𝐴(𝑡)𝐿(𝑡), − 𝛿 − 𝜌 ∗ 𝑒𝑞. 4 ∗
    𝐶 (𝑡 )

    𝐶(𝑡)
    𝑐 (𝑡 ) =
    𝐴(𝑇)
    ln 𝑐(𝑡) = ln 𝐶(𝑡) − ln 𝐴(𝑡)
    𝑐̇ (𝑡) 𝐶̇ (𝑡) 𝐴̇(𝑡)
    = −
    𝑐 (𝑡 ) 𝐶 (𝑡 ) 𝐴 (𝑡 )
    𝑐̇ (𝑡)
    = 𝐹′'𝐾(𝑡), 𝐴(𝑡)𝐿(𝑡), − 𝛿 − 𝜌 − 𝑔
    𝑐 (𝑡 )
    𝑐̇ (𝑡)
    = 𝛼𝑘(𝑡)M"C − 𝛿 − 𝜌 − 𝑔
    𝑐 (𝑡 )

    capital per unit of effective labor on a balanced growth path


    𝑐̇ (𝑡)
    = 0
    𝑐 (𝑡 )
    0 = 𝛼𝑘(𝑡)M"C − 𝛿 − 𝜌 − 𝑔
    C
    𝛿 + 𝜌 + 𝑔 M"C
    𝑘∗ = _ `
    𝛼

    Consumer growth per unit of effective labor on a balanced growth path
    𝑘̇(𝑡) = 0
    0 = 𝑘(𝑡)M − 𝑐 (𝑡) − 𝑘(𝑡)(𝑔 + 𝑛 + 𝛿)
    𝑐 ∗ = 𝑘 ∗ M − 𝑘 ∗ (𝑔 + 𝑛 + 𝛿)

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