Consider the real inter temporal model with investment

Assignment Help Business Economics

Reference no: EM13975065

Consider the real inter temporal model with investment now focus specifically on the representative firm in this model.

1. What does the representative firm maximize in this 2-period model? Use words and symbols.

2. State one of the firm's three optimality conditions and explain why your chosen condition must hold in the equilibrium.

3. Suppose there is a shock such that the representative firm is considered 'risker' and faces higher borrowing costs in the current period. How does this effect the following equilibrium variables: K', w', N',and Y'?

Reference no: EM13975065

Questions Cloud

Government offers a temporary tax credit : For each of the following changes in the macro-economy, show how to think about them using the IS curve, and explain how GDP is affected in the short-run. The government offers a temporary tax credit: for each dollar of investment that firms undertak..

Explain how a decrease in the level of taxes : Assume that Indonesia is a small open economy. Explain how a decrease in the level of taxes (T ∗ ) in the rest of the world affects the world interest rate, the Indonesian interest rate, level of investment, net exports and net capital outflows in In..

Would environmentalists favor command-and control policies : Would environmentalists favor command-and control policies as a way to reduce pollution? Why or why not? From an economic perspective, is it sound policy to pursue a goal of zero pollution? Why or why not?

How to review a science article : Summarize the research and state a question or new experiment you would like to see carried out as a result of this research. You must follow the format in the example below. You must give the full citation, a link to the article, and in the review, ..

Consider the real inter temporal model with investment : Consider the real inter temporal model with investment now focus specifically on the representative firm in this model. What does the representative firm maximize in this 2-period model? Use words and symbols. State one of the firm's three optimality..

Big steel corporation is a price leader in the local steel : Discuss how Big Steel should use the information on the supply of steel by other, smaller competitors when it determines its profit maximizing price.

Use the rule of equal marginal utility : After getting an A on your economics exam, you decide to go to your favourite Mexican restaurant to celebrate. You are having trouble deciding whether to order the chipotle chicken chimichanga or the cilantro seafood enchiladas. Use the rule of equal..

Pros-cons of using tools to combat economic fluctuations : Use of discretionary policy to stabilize the economy should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, and the..

Imports industrial goods and exports agricultural goods : A small country imports industrial goods and exports agricultural goods. Both industry and agricultural are perfectly competitive. A new minimum wage law raises wages in industry but not in agriculture. However, all workers displaced from industry as..

User Account

All Pages