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Consider Gaaldine, a similarly fictional country which has no plans to cut off the rest of the world. Their utility is where = 1/1.04. The interest rate is 4 percent, so 1 + r = 1.04. Output is given by Σβt log ct t=0 Yt = 1.02t i.e. initial output is 1, and it grows at 2 percent per year. The initial net international investment position of Gaaldine is 0. Their per-period budget constraint is (1+r)at + (1+r) xt where at+1 = Yt = Xt + Ct at They must obey the transversaility condition limț→∞ (14r)t = = 0.

Consider Gaaldine, a similarly fictional country which has no plans to cut off the rest of the world. Their utility is where = 1/1.04. The interest rate is 4 percent, so 1 + r = 1.04. Output is given by Σβt log ct t=0 Yt = 1.02t i.e. initial output is 1, and it grows at 2 percent per year. The initial net international investment position of Gaaldine is 0. Their per-period budget constraint is (1+r)at + (1+r) xt where at+1 = Yt = Xt + Ct at They must obey the transversaility condition limț→∞ (14r)t = = 0.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider Gaaldine, a similarly fictional country which has no plans to cut off the rest of the world. Their utility is where = 1/1.04. The interest rate is 4 percent, so 1 + r = 1.04. Output is given by Σβt log ct t=0 Yt = 1.02t i.e. initial output is 1, and it grows at 2 percent per year. The initial net international investment position of Gaaldine is 0. Their per-period budget constraint is (1+r)at + (1+r) xt where at+1 = Yt = Xt + Ct at They must obey the transversaility condition limț→∞ (14r)t = = 0.
Transcribed Image Text:Consider Gaaldine, a similarly fictional country which has no plans to cut off the rest of the world. Their utility is where = 1/1.04. The interest rate is 4 percent, so 1 + r = 1.04. Output is given by Σβt log ct t=0 Yt = 1.02t i.e. initial output is 1, and it grows at 2 percent per year. The initial net international investment position of Gaaldine is 0. Their per-period budget constraint is (1+r)at + (1+r) xt where at+1 = Yt = Xt + Ct at They must obey the transversaility condition limț→∞ (14r)t = = 0.
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