Prof. Bryan Caplanbcaplan@gmu.edu
HW#1(due in class, week 5)
(Please type your answers to all questions, including any mathematics. Each answer should be approximately 1-1.5 pages in length, double-spaced).
1. We have used a number of "infinitely-lived representative agent models," which examine what an economy would look like if it were populated with a large number of agents with identical preferences and abilities. Suppose that you were the representative agent. Answer and elaborate upon each of the following:
If you can easily solve your model, do so. Does it have the "right" implications?
3. Answer ONE of the following:
4. Why is the inflation tax so low in the advanced industrialized countries? Could it conceivably be at its maximum? Suppose you ran a regression of inflation on x1=% of the workforce not engaged in agriculture, and x2=index of democracy (Kuwait=1, U.S.=10). Would x1 or x2 "work" better?
5. Discuss Hallman, Porter, and Small's attempt to handle pre-1950 instability of V2. Could a similar effort salvage their work in spite of the behavior of V2 over the last decade? How plausible would it be?