A simple economy is described by the following model Y = C + Io + Go C = Co + C₁Y • Interpret the parameters Co and C₁ and identify their domains. • Solve for the equilibrium values of the endogenous variables via matrix inversion. • Verify that your solution is correct using Cramer's Rule.
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- Consider the system of equations: pi = β0 + β0qi + β2ti + β3zi + ui qi = α0 + α1pi + α2ki + ԑi where p and q are endogenous variables.t, z and k are exogenous variables.u and ԑ are disturbance terms. And i is cross section. Explain how you would go about estimating the stated system of equations.Sally wants to take out her entire savings from her superannuation to spend today. Is this acting in a time inconsistent manner (according to behavioural economics)? a) Yes b) No Explain:An example of the interaction term between two independent, continuous variables is: a. Yi = B0 + B1Xi+ B2DI + B3(Xi× Di) + ui. b. Yi = BO + B1X1¡+ B2X21+ ui. c. Yi = B0 + B1D1¡+ B2D2I+ B3 (D1i× D2i) + ui. d. Yi = B0 + B1X1¡ + B2X21+ B3(X1i× D21) + ui. e.All of the above. f. None of the above.
- 1) Why does the gravity model work? A) Large economices became large because they were engaged in international trade. B) Large economies have relatively large incomes, and hence spend more on government promotion of trade and investment. C) Large economies have relatively larger areas, which raises the probability that a productive activity will take place within the borders of that country. D) Large economies tend to have large incomes and tend to spend more on imports. E) Large economies tend to avoid trading with small economies. 2) Which of the following does NOT explain the extent of trade between Ireland and the U.S.? A) historical ties B) cultural Linguistic ties C) Gravity Model D) multinational corporations E) large numbers of Irish-Americans 3) In the current Post-Industrial economy, international trade in services (including banking and financial services) A) dominates world trade. B) does not exist. C) is an increasingly important component of global trade. D) is…Consider the model where an individual has wealth k which they can either save or consume. If they save it, they receive a fixed and exogenous return r. The instantaneous utility function is given by: u(c, k) = c + a(k) where c is consumption, k is wealth, and a(k) is a function that defines the utility that an individual gets from holding wealth. The growth in wealth is given as the returns on wealth rk, plus income from working z(t), minus consumption c(t). a. Write out the differential equation for wealth. b. For an infinite time model, set up the optimal control problem with discounting at a rate 8. c. Write the current-valued Hamiltonian of this problem. d. Derive the steady-state level of consumption.List two real-world instances in which rational function or equation is being employed. Also, state how rational function is being applied in each real-life event.
- (c) Consider the following macroeconomic model Y = C + 1 + Go C = 40 + 0.8Y I = 0.1Y How many degrees of freedom does the system have? Given that Go is exogenous government expenditure, find the equilibrium solutions for Y, C and I. b(i) hand written plz (ii)In the context of econometrics, what does establishing Granger causality between two variables imply? A. There is a long-term equilibrium relationship between the variables. B. Past values of one variable can be used to predict the future values of another variable. C. There is a theoretical economic relationship between the variables. D. The variables are correlated.Consider the following one-period model. Assume that the consumption good is produced by a linear technology: Y = zN D where Y is the output of the consumption good, z is the exogenous total factor productivity, N D is the labour hours. Government has to finance its expenditures, G, using a tax on the representative firm. The government collects t units of consumption goods from the firm for each unit of labor it employs (0 < t < 1). There is no other tax in the economy. The firm is owned by the representative consumer who is endowed with h hours of time she can allocate between work, NS and leisure, l. Preferences of the representative consumer are: U(c, l) = ln c + ln l (1) (a) Write down the definition of a competitive equilibrium for the above economy. (b) Show that the Walras’ law holds for this economy. (c) Solve for the leisure, l, the consumption, c, employment, N, wage rate, w, tax rate, τ , and output, Y in equilibrium. (d) Solve for the optimal allocation of leisure,…
- i. List all the endogenous and exogeneous variables in the model.Consider an OLG model in which people live for 3 periods. There is only one consumption good. People are endowed with 5 units of the consumption good when young and nothing in the other two periods of life. Assume that households want to consume the same quantity of goods in each period, i.e. C1 C2 C3. Population does not grow (n=1). Households can save for the next periods in two ways. By holding cash, or by buying capital, kt. Capital may be created from a unit of the consumption good. There is no inflation in the economy, so the (gross) return to cash is one (if you invest 1 today in cash, you get 1 tomorrow). The (gross) return to capital takes 2 periods and it is two (if you invest one 1, you get 2 two periods later). Initially, we assume that nobody is willing to lend (there are no banks!). Furthermore, capital cannot be exchanged for goods or cash: it is illiquid. 1) What is the optimal investment in the first period? How much is the demand for cash Now assume there are banks…please type the answer by computer if you can, so i can see it clearly, thank you!!! Consider the following version of the Solow model: