Ramsey Cass Koopmans model. (a) Consider the Ramsey Cass Koopmans model where k at time 0 (which as always the model takes as given) is at the golden-rule level: k(0) = KGR Sketch the paths of c and k. (b) Consider the same initial situation as in part (a), but in the version of the model that includes government purchases. Assume that G is constant and equal . Crucially, G is strictly less than f (KGR) − (n + g) KGR and strictly greater than f (k∗) − (n + g)k∗ (where k∗ is the level of k on the balanced growth path the economy would have if G were constant and equal to 0).
Ramsey Cass Koopmans model. (a) Consider the Ramsey Cass Koopmans model where k at time 0 (which as always the model takes as given) is at the golden-rule level: k(0) = KGR Sketch the paths of c and k. (b) Consider the same initial situation as in part (a), but in the version of the model that includes government purchases. Assume that G is constant and equal . Crucially, G is strictly less than f (KGR) − (n + g) KGR and strictly greater than f (k∗) − (n + g)k∗ (where k∗ is the level of k on the balanced growth path the economy would have if G were constant and equal to 0).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Ramsey Cass Koopmans model.
(a) Consider the Ramsey Cass Koopmans model where k at time 0 (which as always the model takes as given) is at the golden-rule level: k(0) = KGR
Sketch the paths of c and k.
(b) Consider the same initial situation as in part (a), but in the version of the model that includes government purchases. Assume that G is constant and equal . Crucially, G is strictly less than f (KGR) − (n + g) KGR and strictly greater than f (k∗) − (n + g)k∗ (where k∗ is the level of k on the balanced growth path the economy would have if G were constant and equal to 0).
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