chAClosedEconomyOnePeriodMacroModel(中级宏观经济学,香港中文大学)讲解.pptVIP

Chapter 5A Closed-Economy One-Period Macro Model The Model The economy that we consider is a closed economy, i.e. one that does not trade with other economies. Besides representative consumer and representative firm, there is an additional agent: the government. Government The only action of the government is to implement fiscal policy. Fiscal policy refers to the government’s choices over its expenditures, taxes, transfers and borrowing. The Government Suppose the government wishes to purchase a given quantity of consumption good, G. Since there is only one period, the government cannot borrow to finance G. Thus G is paid by taxing the representative consumer. The government must observe the balanced budget constraint, G = T. Competitive Equilibrium Competitive refers to the fact that all consumers and firms are price-takers. Equilibrium refers to the state when the actions of all consumers and firms are consistent. ? Formal Definition: A competitive equilibrium is a set of endogenous quantities C, Ns, Nd, T and Y, and an endogenous real wage w, such that, given the exogenous variables G, z, and K, the following are satisfied: 1) C and Ns solves the consumer’s problem, max U( C, h-Ns ) C, Ns subject to C = wNs + ? - T and C ? 0 , Ns ? 0. In other words, C and Ns must satisfy the FOC, U2( C, h-Ns ) - wU1( C, h-Ns ) = 0. 2) Nd solves the firm’s problem given z, K and w. Thus the FOC is satisfied. 3) Market-clearing conditions: Labor market clearing ? Ns = Nd = N 4) Balanced Budget constraint: G = T. We have: Goods market clearing ? Y = C + G Combining the two FOCs, we have U2( C, l ) - zF2(K, h - l ) U1( C, l ) = 0. Since ? = zF( K, h - l ) - w Nd and G = T, from the budget constraint C = zF(K, h - l ) - G. From these, we can solve for the equilibrium C and l. Graphical Illustrations St