do only qu 2 u();1. Consider a deterministic DGE model where time lasts for two periods.The representative consumer has the utility function U₁ =faces the budget constraint c, +a, -y, +(1+r), for t=0,1; and has aninitial assets position given by a., <0.a) Specify the maximization problem of the representative consumerand provide its economic interpretation.b) Assume (1)= and (ii) y, for t=0,1, with y>0. Derive1+ranalytically the optimal consumption and assets holding plan andprovide an economic interpretation.c) Explain how your result in part (b) changes if the initial assetposition is positive.2. Consider a stochastic DGE model with uncertainty about future income.The representative consumer has the utility function U,E,'(c.).faces the budget constraint c, +a, = y, +(1+r),.,. for 120, and has aninitial assets position given by a...a) Derive analytically the consumption function under the permanentincome hypothesis.b) Use your result to illustrate analytically how income shocks affectconsumption and provide an economic interpretation.c) Show analytically how increase in income volatility affects currentconsumption and provide an economic interpretation.

Dynamic stochastic general equilibrium (DGE model) is a macroeconomic method of explaining…

1. Consider a deterministic DGE model where time lasts for two periods. The representative consumer has the utility function U, - Σ(₂): faces the budget constraint c, +a, -y, +(1+r),, for t=0,1; and has an initial assets position given by a., <0. a) Specify the maximization problem of the representative consumer and provide its economic interpretation. b) Assume () and (i) y, for t=0,1, with 90. Derive 1+r analytically the optimal consumption and assets holding plan and provide an economic interpretation. c) Explain how your result in part (b) changes if the initial asset position is positive. stochastic DGE 2. Consider a stochastic model with uncertainty about future income DGE model

1. Consider a deterministic DGE model where time lasts for two periods. The representative consumer has the utility function U, - Σ(₂): faces the budget constraint c, +a, -y, +(1+r),, for t=0,1; and has an initial assets position given by a., <0. a) Specify the maximization problem of the representative consumer and provide its economic interpretation. b) Assume () and (i) y, for t=0,1, with 90. Derive 1+r analytically the optimal consumption and assets holding plan and provide an economic interpretation. c) Explain how your result in part (b) changes if the initial asset position is positive. stochastic DGE 2. Consider a stochastic model with uncertainty about future income DGE model

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Question

do only qu 2

u();
1. Consider a deterministic DGE model where time lasts for two periods.
The representative consumer has the utility function U₁ =
faces the budget constraint c, +a, -y, +(1+r), for t=0,1; and has an
initial assets position given by a., <0.
a) Specify the maximization problem of the representative consumer
and provide its economic interpretation.
b) Assume (1)= and (ii) y, for t=0,1, with y>0. Derive
1+r
analytically the optimal consumption and assets holding plan and
provide an economic interpretation.
c) Explain how your result in part (b) changes if the initial asset
position is positive.
2. Consider a stochastic DGE model with uncertainty about future income.
The representative consumer has the utility function U,E,'(c.).
faces the budget constraint c, +a, = y, +(1+r),.,. for 120, and has an
initial assets position given by a...
a) Derive analytically the consumption function under the permanent
income hypothesis.
b) Use your result to illustrate analytically how income shocks affect
consumption and provide an economic interpretation.
c) Show analytically how increase in income volatility affects current
consumption and provide an economic interpretation.

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