Matthias Doepke - Marcroeconomics - Chapter 8 pdf

... 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 section we derive the ... not yet explained 1 See Chapter 4 of Barro for precise definitions of these aggregates. 8. 3 A Cash-in-Advance Economy 67 Solving for ˆ yields: ˆ = 1 2 (8. 14) Equation (8. 13) giv...

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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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... after years under continuous compound- ing 0 Initial value of the investment Table 1.1: Notation for Chapter 1 Year Mar Jun Sep Dec 1996 155.7 156.7 157 .8 1 58. 6 1997 160.0 160.3 161.2 161.3 What ... years.) Exercise 1 .8 (Moderate) World population was about 679 million in the year 1700 and about 954 million in 180 0. 1. What was the annual growth rate of population between 1700 and 18...

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... . 0 0.2 0.4 0.6 0 .8 1 0 0.2 0.4 0.6 0 .8 1 0 0.2 0.4 0.6 0 .8 1 product (y) labor (l) capital (k) Figure 2.1: Cobb-Douglas Production We will not be dealing with capital until Chapter 9, so for now we assume ... Cobb-Douglas function exhibits constant returns to scale, since (1 )+( ) = 1. Figure 2.1 is a three-dimensional rendering of this function for particular values of and . 0 0.2 0...

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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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... (6 .8) if the 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 ... 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 househo...

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... 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- tential source of fluctuations ... single shock has long-run effects, and investment goes through a full cycle in response to this shock. Response to a Single Shock -0 .01 -0 .005 0 0.005 0.01 0.015 0.02 0.0...

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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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... 0.7 0 .8 0.9 1 0 0.05 0.1 0.15 0.2 0.25 Tax revenue when γ=0.5 τ T(τ) Figure 13.1: A government revenue func- tion that exhibits a Laffer curve. A Lump-sum Tax Now let us introduce a lump-sum ... 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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