15611671
Description
Flashcards by Peter Hazlett, updated more than 1 year ago
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Created by Peter Hazlett
over 5 years ago
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| Question | Answer |
| Initial Capital per Household |
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| Depreciation | For simplicity, there is no depreciation of the capital stock. |
| Household's Utility Function |
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| Instantaneous Utility Function |
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| Constant-Relative-Rise-Aversion (CRRA) |
If theta <0, then household is risk loving.
If theta >0, then household is risk adverse.
In RCK, theta >0.
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| Real Interest Rate |
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| Wage per Unit of Effective Labor |
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| Household's Budget Constraint |
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| R_t |
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| Household's Capital Holding at time s |
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| Optimal Consumption Growth |
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| Growth Rate of Consumption per Unit of Effective Labor |
Since r=f'(k), we can write this with f'(k) in place of r.
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| Rate of Change of Capital per Unit of Effective Labor |
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| Golden Rule |
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| Assumption That Prevents Lifetime utility from Diverging |
If this condition does not hold, the household can attain infinite lifetime utility, and its maximization problem does not have a well-defined solution.
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| Phase Diagram |
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| The Saddle Path |
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| Effects of Government Purchases |
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| Speed of Convergence | Lambda = alpha |
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