Ramsey Cass Koopmans model.(a) Consider the Ramsey Cass Koopmans model where k at time 0 (which as always themodel takes as given) is at the golden-rule level: k(0) = K GRSketch the paths of c and k.(b) Consider the same initial situation as in part (a), but in the version of the model thatincludes government purchases. Assume that G is constant and equal . Crucially, G isstrictly less than f (K GR ) − (n + g) K GR and strictly greater than f (k∗) − (n + g)k∗ (wherek∗ is the level of k on the balanced growth path the economy would have if G were constantand equal to 0).
Ramsey Cass Koopmans model.(a) Consider the Ramsey Cass Koopmans model where k at time 0 (which as always themodel takes as given) is at the golden-rule level: k(0) = K GRSketch the paths of c and k.(b) Consider the same initial situation as in part (a), but in the version of the model thatincludes government purchases. Assume that G is constant and equal . Crucially, G isstrictly less than f (K GR ) − (n + g) K GR and strictly greater than f (k∗) − (n + g)k∗ (wherek∗ is the level of k on the balanced growth path the economy would have if G were constantand 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) = K GR
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 (K GR ) − (n + g) K GR 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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