Discuss the short-run dynamics

Reference no: EM131167558

Adjustment costs for human and physical capital. Consider the model from section in which consumables and physical and human capital are produced by the same technology. Imagine, however, that there are adjustment costs for changes in the two types of capital. The unit adjustment costs, analogous to the formulation discussed in section 3.3, are (b_K /2)·(I_K /K) for K and (b_H /2)·(I_H /H) for H. Assume that the depreciation rates for each types of capital are 0.

a. Discuss the parameters b_K and b_H. Which one would likely be larger?

b. Suppose that b_K = b_H. Discuss the short-run dynamics if the economy begins with K(0)/H(0)(K/H)∗?

c. Suppose now that b_K_H. Redo part b, and comment on the main differences in the results.

Reference no: EM131167558

Questions Cloud

Financial assets impairment entries and with ifrs impairment : Could you please provide a distinction between (Without IFRS impact) Financial Assets Impairment Entries and with IFRS impairment on Financial Assets.

How was the anti-diuretic hormone affected : What would be your diagnosis? Be prepared to discuss the signs and symptoms of this condition. How was the anti-diuretic hormone (ADH) affected in this case? Can the overconsumption of too much water be corrected? If so, how

Financial assets impairment entries : Could you please provide a distinction between (Without IFRS impact) Financial Assets Impairment Entries and with IFRS impairment on Financial Assets.

Practice of selling borrowed stock : Short selling is the practice of selling borrowed stock with the expectation of earning a profit later, when the shares are bought back at a lower price. What can a company do about short sellers?

Discuss the short-run dynamics : Discuss the parameters bK and bH. Which one would likely be larger - Suppose that bK = bH. Discuss the short-run dynamics if the economy begins with K(0)/H(0)(K/H)∗?

What next process does the business go to : When a business has reached a size large enough to qualify for listing on a public stock exchange, it typically converts all preferred stock to common stock. True or false? What next process does the business go to?

How hif can increase performance through angiogenesis : Blood doping (using injected substances to artificially enhance performance) is illegal in many sports. how HIF can increase performance through angiogenesis

What effects would it have on her urine output : Marissa has had a urinalysis that detected large amounts of plasma proteins and white blood cells in her urine. What condition might be responsible, and what effects would it have on her urine output

Steady-state growth rate of the economy : What is the steady-state growth rate of the economy? How does this answer differ from the one discussed in the text for the case in which the intermediate inputs were perishable goods?

User Account

All Pages