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What is the best choice of kt for period

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Reference no: EM131105349

Consider a policy maker who uses and instrument kt, to control the path followed by some target variable Y,. The policy maker has the following Objective function
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The environment imposes the following constraint on this policy maker:
Yt = .2kt + .6Yt-1.
The initial Y0 is known to be 60.
(a) What is the best choice of kt for period t = 4?
(b) What is the best choice of kt for period t - 3?
(c) From these, can you iterate and find the best choice of kt for t = 1?
(d) Determine the value function Vt that gives the optimal payoff for t = 1, 2, 3, 4.
(e) Plot the value function Vt and interpretit. 

Reference no: EM131105349

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