ECON 702 Final: ECON702 FinalSpring2012Solution
Document Summary
Consider the neoclassical growth model discussed in class. There is a single representative household and a single representative firm, that live forever. , and the lifetime utility is t lcu t lcu t t t. 1 household has 1 unit of time, so the labor supply is is investment and owns the capital stock. 0 k tk , with the law of motion. 0 tx tw per unit of labor supplied to the firm, a rental rate tr per unit of capital stock rented to the t - the profit (dividend) from the representative firm. There is a single firm, and x t is given. , where hkf t representative firm that produces the output in this economy, with production function th is labor. Assume that y t satisfies all the assumptions of a neoclassical production function. The t hkf t economy is closed and there is no government, thus the feasibility constraint is: c t x t: (10 points).
