ECON 704 Midterm: prfall16_Rios-Rull_704

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31 Jan 2019

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In the following there are 11 questions for 100 points. Be as brief as you can and good luck. Consider a lucas-tree type economy with a measure one of trees. The amount of fruit in each tree, z, is random and markovian with transition z,z . All households are identical, discount the future at rate , and have preferences each period given by u(c), is an iid shock to preferences with probability distribution , c is fruit. There is a matching function m(t , d) that determines the number of matches, given the trees. Imagine that preferences of a representative consumer in a static closed economy are given by u({c(i)}i [0,a], n) =(cid:18)z a. Where 1 n is leisure and n is time spent working. Output is produced with one unit of labor that is taken to be the numeraire.

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