5 votes
Accepted

Marginal and Average Cost in the Romer Model of Endogenous Growth

The cost minimization problem (in general) is given by: $$ \min_{L_i} \int_0^A p(i) L(i) di \text{ s.t. } \left(\int_0^A L(i)^{\phi}\right)^{1/\phi} = y. $$ where $y$ is the output level. The ...
tdm's user avatar
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3 votes
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Differences of two discount factors

The value $e^{-\rho t}$ is the discount rate that you need to apply if the per period interest is $\rho$, but interest is accumulated continuously. The value of $\rho$ can be interpreted as the per ...
tdm's user avatar
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2 votes

Resources for a Deep Dive into the New Keynesian / DSGE models

Wickens Macroeconomic Theory: A Dynamic General Equilibrium Approach, is good resource that has what you are looking for.
1muflon1's user avatar
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2 votes

why does consumption not have a positive multiplier?

I think either you misunderstood your tutor or they were not clear. What they likely meant was that increase in total $C$ won’t be multiplied by multiplier. I think this is best seen mathematically. I ...
1muflon1's user avatar
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1 vote
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Can GDP ever be negative?

Yes, theoretically, GDP could be negative, and you have described a pathological case where that happens. Gross value added in your example over the two periods is still positive, but the particular ...
jpfeifer's user avatar
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1 vote
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Have governments ever defaulted on its public domestic debt or treasury bonds?

Has there ever been a time when a government defaulted on its due to a country's economic state, such as hyperinflation, or for some national or international political issue? Yes, since default ...
1muflon1's user avatar
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1 vote
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Why does price stickiness induce non-determinate interest rates in the NK model?

You may want to have a look at Galí's (2015) "Monetary Policy, Inflation, and the Business Cycle", Chapter 2. In a basic flex price model where the classical dichotomy holds, the nominal ...
jpfeifer's user avatar
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1 vote

How did Malta catch up?

European airline deregulation in 1997 helped with tourism, Malta privatized some government assets, joined the EU in 2004, joined the Euro in 2008, history with the U.K. and use of English as a second ...
H2ONaCl's user avatar
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1 vote

What is the name of the principle "GDP=Production=Income=Expenditure"?

There is no special technical jargon for it. You can call it equivalence or three sided equivalence between income, expenditure and production. However, that’s not really a term but rather a ...
1muflon1's user avatar
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1 vote

Why does the Rocket Internet purposefully abandon the market of China?

I thought someone would have written up the answer in the meantime: China currently caps total foreign ownership in locally listed firms at 30%, and subjects a single foreign shareholder to a 10% ...
Giskard's user avatar
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1 vote

What assumptions can be made to ensure convexity in this optimization problem?

Assume that $f$ is convex in $A$ and that $u$ is convex and increasing in $c$. We also assume that the optimization problem has a solution. Consider $A_1$ and $A_2$ and let $\alpha \in [0,1]$. Let: $$ ...
tdm's user avatar
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