Matthias Doepke - Marcroeconomics - Chapter 6,7 doc

... works only an integral numbers of years. For non-integral num- bers, you round down to the nearest integral year ,compute ( ), and use that in the simple-interest formula (1.1) for the fraction of ... economists prefer continuous growth rates is that they have the follow- ing desirable property: if you compute the year-by-year continuous growth rates of a series and then take the average of ....

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... problems of constrain- ed maximization when it is either difficult or impossible to solve the constraints for indi- vidual variables. At first we treat the method as a cook-book recipe. After we ... even easier. Above we derived: = 1+ There is no on the right-hand side, so when we take the partial derivative with respect to , the right-hand side is just a constant. Accordingly, = 0, i.e., Cruso...

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... Cycles Technology shocks: Real-world production functions change over time. New tech- nologies like computers or robots alter the production process and raise overall pro- ductivity. Sometimes, production ... computers. Monetary shocks: We saw in Chapter 8 on inflation that there are real effects of mon- etary policy. Therefore random changes to money supply or interest rates are a po- tenti...

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... 13.1: A government revenue func- tion that exhibits a Laffer curve. A Lump-sum Tax Now let us introduce a lump-sum tax of amount . 2 No matter what income the house- hold accumulates, it will be ... function of . The government’s period-by-period revenue function ( ) is now simply: ( )= ( SS SS ) where SS is the steady-state investment level (which is tax-exempt). We can find SS by solving ......

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... interest rate in- creases. That means that the right-hand side increases, so the left-hand side must increase in order to maintain the equality. There are two ways that the left-hand side can ... equation (6.3) gives us: = 1 1 = 1+ 1 1 1 = 1+ Chapter 6 The Labor Market This chapter works out the details of two separate models. Section 6.1 contains a one- period model in which households a...

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... second-period income increases, then does too. Conversely, if second-period in- come decreases, then does too. This makes intuitive sense. If 2 goes down, households will try to invest first-period ... )= 1 [ 2 + 1 (1 + )] (1 + )(1 + ) so we set the left-hand side to zero and solve for : 1 = [ 2 + 1 (1 + )] (1 + )(1 + ) (3.11) 3.2 A Two-Period Model 23 3.2 A Two-Period Model We begin this sect...

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... one market-clearing constraint is redundant. This means that if each consumer’s budget constraint is satisfied and all but one market-clearing con- ditions hold, then the last market-clearing ... pure-exchange economy, assume that the bud- get constraints for each of the consumers and the market-clearing constraints for the first 1 goods are satisfied. We want to show that the last market-cleari...

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... monetary pol- icy. While the prime emphasis of the cash-in-advance model is the inefficiency of holding cash instead of interest-bearing assets, Chapter 19 turns to the issue of expected versus un- expected ... inflation that we will pick up later in this book. Chapter 18 is concerned with the coordination of monetary 8.3 A Cash-in-Advance Economy 61 8.3 A Cash-in-Advance Economy In this se...

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... production function equa- tion (11.1) exhibits constant returns to scale, which means that if we double both inputs, output also doubles. Our choice of a constant-returns-to-scale production function ... with 1 See Chapter 1 for a discussion of growth rates and how to compute them. Chapter 11 Economic Growth This chapter examines the determinants of economic growth. A startling fact abo...

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... war steady-state, but the relatively short duration of the war prevents it from ever reaching that steady-state. After the war the econ- omy transitions slowly back to its pre-war steady-state. ... fully discuss tax policy, for this chapter we will assume that the gov- ernment levies a very special kind of tax: a lump-sum tax. That is, the government an- nounces a spending plan and then ......

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