ECON 423 - Problem Set #4 Solutions

ECON 423 - Problem Set #4 Solutioins

Macro Simulation Excercise

1a. 210, 12.5
1b. 220, 11 0r 12 periods
1c. 217.5, none, 11.38
1d. 235, 11 or 12 periods
1e. 254.85, 10.37 (accepted 233.3, 36.667 as well)
1f. Reduced form equations:
Y_t = 35+0.5Y_t-1+0.0R_t+2.5G_t
C_t = 33+0.3Y_t-1+0.0R_t+1.5G_t
I_t = 2+0.2Y_t-1+0.0R_t+0.0G_t
T_t = -1.25+0.125Y_t-1+0.0R_t+.625G_t

The short-run multipliers are the numbers in the reduced form equations. The long-run multipliers are 1/(1-srm) where srm is the short-run multiplier.
Summary: Multiple correct answers.