Center for Chinese Economic Research， PKU
Macroeconomic Theory II ： Homework I
Professor T. Huo Spring 2005
1. A conventional approach in studying the saving behavior is to regress aggregate savings on interest rates directly. If the coefficient of regression is positive， we say the theory of saving is valid； however， if the coefficient is negative， we say the theory is invalid. Critically evaluate this approach. Does your conclusion depend on non-storable goods assumption？ Explain.
2. Consider the Ramsey model in which goods are non-storable. Suppose all households have the following identical preference