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Q1. Draw graphs of AR(1) process y_k = 0.75y_k-1 + e_k for
a) y_0 = 1b) y_0 = 10.
Suppose that e_k is uniformly distributed on the interval [-0.5, 0.5].
Hint: use the function rand () (or similar) for uniform distribution on the interval [0, 1] available in modern languages (C/C++, Java) also computational software (Excel, Matlab etc.) also subtract 0.5 from its values.
Express qualitative difference among the graphs a) also b).
Q2. Which of the following institutional arrangements is most likely to promote growth?
Starting with the situation in part d, suppose the government starts taxing the population $30 each year without spending anything.
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Suppose you are the manager of a home-building company and the government is considering eliminating the deduct-ability of mortgage payments interest.
She is now considering raising her prices by 20 percent to offset the increase in her monthly rent.
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According to the production function, with 300 labor hours, Illustrate what is this economy's capacity to produce.
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