The answer should be typed. 2. Consider the standard Ramsey-Cass-Koopmans model. Assuming no depreciation and using the

The answer should be typed.

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2. Consider the standard Ramsey-Cass-Koopmans model. Assuming no depreciation and using the same notation as in the Romer's textbook (and in the class slides), the key dynamic equations are: (t) f'(k(t))-p-0g c(t) 8 k = f(k(t))-c(t)-(n+g)k(t) (a) Briefly describe the economic intuition behind both these equations and where they come from. (b) Assuming that the economy is initially in a dynamic equilibrium (steady state), use a phase diagram to illustrate and describe the trajectories of k and e following: 1 i. a sudden unexpected increase in the growth rate of the labor force; ii. a sudden, unexpected and temporary alien attack that destroys 20 per- cent of the capital stock but leaves the labor force unchanged; iii. a sudden, unexpected and temporary alien attack that destroys 20 per- cent of the capital stock, leaves the labor force unchanged, but also affects households confidence by raising the discount rate. 2. Consider the standard Ramsey-Cass-Koopmans model. Assuming no depreciation and using the same notation as in the Romer's textbook (and in the class slides), the key dynamic equations are: (t) f'(k(t))-p-0g c(t) 8 k = f(k(t))-c(t)-(n+g)k(t) (a) Briefly describe the economic intuition behind both these equations and where they come from. (b) Assuming that the economy is initially in a dynamic equilibrium (steady state), use a phase diagram to illustrate and describe the trajectories of k and e following: 1 i. a sudden unexpected increase in the growth rate of the labor force; ii. a sudden, unexpected and temporary alien attack that destroys 20 per- cent of the capital stock but leaves the labor force unchanged; iii. a sudden, unexpected and temporary alien attack that destroys 20 per- cent of the capital stock, leaves the labor force unchanged, but also affects households confidence by raising the discount rate.