ECON 702 Midterm: prelim-S17_702Menzio
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Instructions: there is one question, divided in several subquestions. The number in brackets represents the number of points awarded for answering correctly the each subquestion. If the description of the environment seems incomplete to you, explain why, make the assumptions that you deem necessary to proceed and continue. Consider a version of the olg model in which population grows over time. Speci(cid:133)cally, generation t has measure gt = (cid:13)t, with (cid:13) (cid:21) 1 and g0 = 1, and endowment (e1t; e2t) = (e1; e2), with e1 > 0 and e2 > 0. Each member of generation t has preferences described by the utility function u(ct1; ct2) = log ct1 + log ct2. There is a quantity of (cid:133)at money m , allocated to the old of generation 0: (35) no monetary injection. Euler equation as a di erence equation for zt and zt+1: (10) express the euler equation as a function zt+1 = f (zt).
