Re: ricardian model sis 2017 question

Posted by soimmoi on Oct 30, 2017; 11:25am
URL: http://discussion-forum.276.s1.nabble.com/IS-LM-QUESTION-2017-SSS-tp7608233p7608234.html

41. Consider a closed economy without government spending or taxes. The equilibrium
value of output in each period is determined by the equality of (the value of) output and
expenditure. Saving in period t is given by S(t) = s · Y (t) and investment expenditure in
period t + 1 is given by I (t + 1) = a + b · Y (t), for all values of t. a is a positive constant, s
and b are positive constants less than unity and Y(t) is the value of output in period t.
What relation must hold between the values of s and b for there to exist a value of
output in this economy, which once achieved in a time period will continue to persist in
subsequent periods of time?