Econ90003 Tutorial2
Econ90003 Tutorial2
Chris Edmond
Macroeconomics
Tutorial #2
ct + kt+1 kt↵ , t = 0, 1, . . .
v(k) = A + B log k
where ✓ ◆
1 ↵
A= log(1 ↵ )+ log(↵ )
1 1 ↵
and
↵
B= >0
1 ↵
2. Properties of the policy function. Consider a strictly increasing strictly concave production
function f (k) that satisfies f (0) = 0 and f 0 (0) = +1 and f 0 (1) < 1. Suppose the policy
function kt+1 = g(kt ) has the form g(k) = sf (k) for some s 2 (0, 1).