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Instructor: Marco Del Negro
Economia V, Spring 2000
PROBLEM SET 2, SOLUTIONS
3)
México. U.S.
Px=10 pesos P= Px/Py= 1/5
Py= 1 peso Px=5py
e=10 pesos Px/5=0.2
x= gold Y= haircuts Px=1 U.S. (tradable good)
U(x,y)=50.11
4)
W=20 Y1=90 Y2=110 C=0.1
(1+r)(Y1+W-C1)=C2-Y2
(1.1)(90+20+C19=C2-110
(99+22-(1.1)C1)=C2-110
121-(1.1)C1=C2-110
place for graph
SAVE S
d) d1)
S=W+Y1-C1=20+101-110.5010.5
d2)
S=w+Y1-C1=20+90-110=0
d3)
S=10.5
5)
a) CC goes up savings go down
b) C=
c) CC=goes down, s goes up
d) if Y2 goes down: CC goes down, S goes up
if Y2=, CC=, S=
e) C= (permanent income does not change)
f) CC goes down, S goes up
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Marco Del Negro
2000-01-31