(a) In the Solow model, the steady-state capital stock associated with the golden rule rate
of saving is a decreasing function of the depreciation rate of capital.
(b) In the Diamond-Mortensen-Pissarides model of the labour market, the fundamental
theorems of welfare do not apply.
(c) The equity premium puzzle would be less severe if, in the data, consumption growth and
excess returns of stocks over bonds were less strongly correlated, everything else equal.
(d) The Hodrick-Prescott filter can be used to take a trend with constant growth out of a
(e) Consider a labour market matching function m = µuγ
, where m is the number of
new matches, u is the unemployment rate, v is the number of job vacancies, and γ ∈ (0, 1)
and µ > 0 are parameters. Given this matching function, the job finding rate is negatively
related to the vacancy filling rate.
(f) The Kaldor growth facts imply that, on average, the aggregate capital stock grows at
the same rate as aggregate output.
Question 2. Labour supply (25 points)
Consider a static model of a household with preferences given by:
U(c, h) = c
1−σ − 1
1 − σ
1 + ψ
where σ, κ, ψ > 0 are preference parameters. The household chooses consumption (c) and
hours worked (h) to maximize U(c, h), subject to the following budget constraint:
c = wh,
where w is the wage rate per hour worked.
(a) Derive the first-order conditions for consumption and hours worked (labour supply).
(b) Derive the Frisch elasticity of labour supply in this model.
(c) Show that when σ = 1 (so that U(c, h) = ln c −
), the number of hours worked
chosen by the household does not react to a change in the wage rate w.
(d) Suppose now that ψ = 1 and σ = 2. If the wage increases by 1 percent, by how much
does labour supply change? Decompose your answer into the underlying effects.
(e) Derive an analytical expression for elasticity of consumption with respect to the wage
(for general σ, κ, ψ > 0). Show that this elasticity strictly exceeds 1 if and only if σ < 1 and
explain intuitively why this is the case.
Question 3. Consumption of durables and non-durables (15 points)
Consider an infinitely-lived household which consumes both durables and non-durables. Expected discounted utility at time zero is given by:
where ct denotes consumption of non-durables in period t, dt
is the stock of durables owned
by the household in period t, β ∈ (0, 1) is the household’s subjective discount factor, and Et
is the expectations operator conditional upon information available in period t. The price of
both durables and non-durables is one. The budget constraint of the household in period t
is given by:
ct + dt = yt + (1 − δ) dt−1, t = 0, 1, 2, 3..
where δ ∈ (0, 1) is the depreciation rate of durables and yt > 0 is an exogenous income
variable, which follows a stochastic but stationary process. In each period t, the household
chooses ct and dt such as to maximize the expected present value of lifetime utility.
(a) Derive the first-order optimality conditions associated with the household’s decision
Suppose now that the utility function is given by u (ct
, dt) = ct + γ ln dt
(b) Derive an analytical expression for dt
in terms of the model parameters and show that
dt remains constant over time (given the parameters).
(c) Show that dt
is increasing in β and explain intuitively why this is the case.
2For simplicity, ignore any non-negativity constraint on ct.
Question 4. Pricing inflation risk (20 points)
Consider an infinitely-lived, representative household with preferences given by
U0 = E0
t − 1
1 − ρ
where ct denotes consumption at time t, β ∈ (0, 1) is the discount factor and ρ > 0 is the
coefficient of risk aversion. The household can invest in two types of one-period bonds: (i)
nominal bonds, denoted Bn
, which offer a nominal interest rate r
, (ii) inflation-linked
bonds, denoted Bi
, which offer a nominal interest rate r
(1 + πt+1), where πt+1 =
− 1 is
the inflation rate in period t+1, and where Pt
is the nominal price level in period t. Inflation
is uncertain, i.e. it evolves stochastically over time.
The budget constraint of the household in period t, in nominal terms, is given by:
Ptct + B
t + B
t = Ptyt +
1 + r
1 + r
(1 + πt) B
is an exogenous and stochastic income flow. In each period, the household chooses
in order to maximize the utility objective given above, subject to the budget
constraint. Let b
t ≡ Bn
/Pt and b
t ≡ Bi
/Pt denote the real values of nominal and inflationlinked bonds, respectively.
(a) Re-write the budget constraint in real terms (as opposed to nominal terms).
(b) Derive the Euler equations for the two types of bonds. Which of the two bonds would
the household consider to be risk-free?
Suppose now that in equilibrium it holds that yt = ct and that the central bank sets a
monetary policy according to a rule which targets inflation as a function of output growth:
πt = γ
, where γ > 0 is a policy parameter.
(c) Consider the risk premium formula derived in class for the excess return of equity, but
apply it instead to the two bonds considered above. Which of the two bonds earns a higher
ex-ante expected return?
(d) Discuss the intuition for your answer under (c).
Compelling correspondence is essential to the achievement all things considered but since of the changing idea of the present working environments, successful correspondence turns out to be more troublesome, and because of the numerous impediments that will permit beneficiaries to acknowledge the plan of the sender It is restricted. Misguided judgments.In spite of the fact that correspondence inside the association is rarely completely open, numerous straightforward arrangements can be executed to advance the effect of these hindrances.
Concerning specific contextual analysis, two significant correspondence standards, correspondence channel determination and commotion are self-evident. This course presents the standards of correspondence, the act of general correspondence, and different speculations to all the more likely comprehend the correspondence exchanges experienced in regular daily existence. The standards and practices that you learn in this course give the premise to additionally learning and correspondence.
This course starts with an outline of the correspondence cycle, the method of reasoning and hypothesis. In resulting modules of the course, we will look at explicit use of relational connections in close to home and expert life. These incorporate relational correspondence, bunch correspondence and dynamic, authoritative correspondence in the work environment or relational correspondence. Rule of Business Communication In request to make correspondence viable, it is important to follow a few rules and standards. Seven of them are fundamental and applicable, and these are clear, finished, brief, obliging, right, thought to be, concrete. These standards are frequently called 7C for business correspondence. The subtleties of these correspondence standards are examined underneath: Politeness Principle: When conveying, we should build up a cordial relationship with every individual who sends data to us.
To be inviting and polite is indistinguishable, and politeness requires an insightful and amicable activity against others. Axioms are notable that gracious “pay of graciousness is the main thing to win everything”. Correspondence staff ought to consistently remember this. The accompanying standards may assist with improving courtesy:Preliminary considering correspondence with family All glad families have the mystery of progress. This achievement originates from a strong establishment of closeness and closeness. Indeed, through private correspondence these cozy family connections become all the more intently. Correspondence is the foundation of different affiliations, building solid partners of obedient devotion, improving family way of life, and assisting with accomplishing satisfaction (Gosche, p. 1). In any case, so as to keep up an amicable relationship, a few families experienced tumultuous encounters. Correspondence in the family is an intricate and alluring marvel. Correspondence between families isn’t restricted to single messages between families or verbal correspondence.
It is a unique cycle that oversees force, closeness and limits, cohesiveness and flexibility of route frameworks, and makes pictures, topics, stories, ceremonies, rules, jobs, making implications, making a feeling of family life An intelligent cycle that makes a model. This model has passed ages. Notwithstanding the view as a family and family automatic framework, one of the greatest exploration establishments in between family correspondence centers around a family correspondence model. Family correspondence model (FCP) hypothesis clarifies why families impart in their own specific manner dependent on one another ‘s psychological direction. Early FCP research established in media research is keen on how families handle broad communications data. Family correspondence was perceived as an exceptional scholastic exploration field by the National Communications Association in 1989. Family correspondence researchers were at first impacted by family research, social brain science, and relational hypothesis, before long built up the hypothesis and began research in a family framework zeroed in on a significant job. Until 2001, the primary issue of the Family Communication Research Journal, Family Communication Magazine, was given. Family correspondence is more than the field of correspondence analysts in the family. Examination on family correspondence is normally done by individuals in brain science, humanism, and family research, to give some examples models. However, as the popular family correspondence researcher Leslie Baxter stated, it is the focal point of this intelligent semantic creation measure making the grant of family correspondence special. In the field of in-home correspondence, correspondence is normally not founded on autonomous messages from one sender to one beneficiary, yet dependent on the dynamic interdependency of data shared among families It is conceptualized. The focal point of this methodology is on the shared trait of semantic development inside family frameworks. As such, producing doesn’t happen in vacuum, however it happens in a wide scope of ages and social exchange.
Standards are rules end up being followed when performing work to agree to a given objective. Hierarchical achievement relies significantly upon compelling correspondence. So as to successfully impart, it is important to follow a few standards and rules. Coming up next are rules to guarantee powerful correspondence: clearness: lucidity of data is a significant guideline of correspondence. For beneficiaries to know the message plainly, the messages ought to be sorted out in a basic language. To guarantee that beneficiaries can without much of a stretch comprehend the importance of the message, the sender needs to impart unmistakably and unhesitatingly so the beneficiary can plainly and unquestionably comprehend the data.>