Essays

In a normal Ramsey model—with, for example, a Cobb-Douglas production function--what’s the relationship among the rate of time preference, the steady-state interest rate, and the steady-state savings rate?

Which one of these three are exogenous within the Ramsey model, and which two are endogenous? If the exogenous value rises, what is the steady-state effect on the other two, if any? Explain the mechanisms at work in creating (or not creating) a steady-state effect. What cross-country data might you use in the real world to test whether the exogenous value differs across countries?

How do sticky-price (not sticky wage) New Keynesian models explain varying rates of employment over the business cycle? How do real business cycles theories explain varying rates of employment over the business cycle? What are some of the debates in play over the ability of these two business cycle theories to explain varying rates of employment over the business cycle? [Do not discuss sticky wages.]

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How do two or three different business cycle theories explain why investment is more volatile than consumption?