## Introduction to Dynamic Macroeconomic Theory: An Overlapping Generations ApproachEconomies are constantly in flux, and economists have long sought reliable means of analysing their dynamic properties. This book aims to provide a succinct and accessible exposition of modern dynamic (or intertemporal) macroeconomics. |

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Page 23

efficient.

**EXERCISE**1.7 Prove the following. If an allocation is Pareto optimal, then it isefficient.

**EXERCISE**1.8 Consider the resources, technology, and allocations of**Exercise**1 . 1 and the utility function of**Exercise**1 .6. Prove that the allocation ...Page 27

Try proving

efficiency and equality of MRS are not sufficient conditions for Pareto optimality.

members ...

Try proving

**Exercise**1.12 before reading on.**EXERCISE**1.12 Prove thatefficiency and equality of MRS are not sufficient conditions for Pareto optimality.

**Exercise**1.12 can be proved by example. Here is a hint. Suppose that all of themembers ...

Page 140

We illustrate this process in the following

York Times of May 3 , 1 990, gives the following interest rates on U.S. Treasury

bills. Let t = May 2, 1990; lei: r(t) = 7.42; and let r2(t) = 7.73. Use Equation (5.6) to

...

We illustrate this process in the following

**exercise**.**EXERCISES**. 10 The NewYork Times of May 3 , 1 990, gives the following interest rates on U.S. Treasury

bills. Let t = May 2, 1990; lei: r(t) = 7.42; and let r2(t) = 7.73. Use Equation (5.6) to

...

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### Contents

Describing the Environment | 5 |

Competitive Equilibrium | 32 |

Introducing a Government | 55 |

Copyright | |

10 other sections not shown

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### Common terms and phrases

45-degree line A-period bonds aggregate savings function amount arbitrage assets autarky Bailey curve bequests bliss point borrowing and lending budget line capital stock Chapter chooses competitive equilibrium Consider an economy consumption allocation consumption point consumption when old consumption when young credit controls crop endowment point equal Equation equilib equilibrium condition equilibrium price example economy exchange rate EXERCISE expected price fiat money Figure given gives government bonds government revenues gross interest rate growth rate hold indifference curve individual h inflation labor lifetime budget constraint market clearing maximize member h money creation money supply output Pareto optimal Pareto superior perfect foresight period person h pm(t present value price of land price path price sequence private borrowing production function Proposition purchase quantity rate of return reserve requirement restrictions result Ricardian equivalence seignorage solve stationary equilibrium stationary monetary equilibrium storage sumption tax-transfer scheme taxes and transfers temporary equilibrium tion utility function