... 132stationarity, 16 steady-state, 59, 61 , 137optimal savings, 140stochastic process, 3, 82ARMA, 16 Taylor expansion, 118transversality condition, 4, 53, 54, 59, 60 , 62 ,139, 143user cost of capital, 61 , ... level of employment, because for c∗≥ 1allproductionoppor-tunities are accepted. The locus of stationary points is thus vertical for c∗> 1. The dynamic expression for c∗is given by˙c∗= ... lead to an increase in the mass of vacancies.(c)(d) 266 ANSWERS TO EXERCISESSolution to exercise 51Totally differentiating (5.45) and (5. 46) around a steady state equilibriumpoint, we obtain1...