Consider a standard Ramsey model without labor that is on its balanced growth path. Assume that in
Fantastic news! We've Found the answer you've been seeking!
Question:
Consider a standard Ramsey model without labor that is on its balanced growth path. Assume that in period t = 0 a negative unanticipated total factor productivity shock hits the economy.
(a) What is the impact on the economy if this shock is permanent? The use of economic intuition and detailed graphical analysis, using the phase diagram, is needed along with the appropriate discussion.
(b) What is the impact on the economy if this shock is temporary and only lasts for three periods (until, and including, period t=2)? Your answer should provide economic intuition and a detailed graphical analysis and discussion using the phase diagram
Related Book For
Posted Date: