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ECON60111
THE UNIVERSITY OF MANCHESTER
MACROECONOMIC THEORY
Semester 1 2025/26
Release Date: xx January 2026, xx:xx am/pm
Submission Deadline: xx January 2026, xx:xx am/pm + 48 hours
INSTRUCTIONS SPECIFIC TO THIS EXAM:
Section A contains 1 question worth 50 points. Section B contains 3 questions, each
of which is worth 25 points.
You must answer all of Section A and 2 out of 3 questions from Section B.
You must submit typed responses. Hand-written responses are not acceptable.
Any equations must be typed. However, hand-drawn diagrams are acceptable, as
long as they are included within the main document of your submission.
You must submit your answers as a PDF.
Ensure that any included diagrams are oriented correctly. Marks will be deducted
if your diagrams are rotated 90 degrees, upside down, etc.
Do not submit an image of typeset answers. Do not include equations by inserting
pictures of equations.
Students are not permitted to discuss their answers with other students before
submission.
Students are expected to demonstrate to the examiners a competent knowledge of
all computations.
Students are also advised that the examiners attach considerable importance to the
clarity with which answers are expressed.
The University of Manchester, 2025/26
Page 1 of 3
ECON60111
SECTION A
Answer all parts of the one question in this section.
1. Growth, saving and real interest rate
Thomas Piketty, in Capital in the Twenty-First Century, argues that a fall in the
growth rate of the economy is likely to lead to an increase in the difference between
the real interest rate and the growth rate. This problem asks you to investigate
this issue in the context of the Ramsey-Cass-Koopmans (RCK) model. Specifically,
consider a RCK economy that is on its balanced growth path, and suppose there is
a permanent fall in g.
(a) How, if at all, does this affect the k
˙ = 0 and c˙ = 0 curves Illustrate the change
in these curves in a diagram and give economic intuition. (10 points)
(b) At the time of the change, does c rise, fall, or stay the same, or is it not possible
to tell What about in the long run Explain. (10 points)
(c) At the time of the change, does r g rise, fall, or stay the same, or is it not
possible to tell What about in the long run Explain. (10 points)
(d) Letting s = [f(k
) c
]/f(k
) denote the fraction of output that is saved on the
balanced growth path, find an expression for s/ g. Can you tell whether this
expression is positive or negative Explain. (10 points)
(e) Assume the production function is Cobb-Douglas, f(k) = k
α and suppose α =
1/3, ρ = 0.04, n = 0.005. Plot the steady-state value of three variables against
g, from g = 0 to g = 0.1, for two scenarios: θ = 0.75 and θ = 1.5. The three
variables you need to plot are: (i) the saving rate s, (ii) capital k
and (iii)
the interest rate r. Interpret your result. Note: you should use software (e.g.,
Matlab, Excel) to generate the requested plots. (10 points)
2 of 3
ECON60111
SECTION B
Answer 2 out of 3 questions in this section.
Word limit for each question: 750 words.
1. Define the golden-rule level of capital and the modified golden-rule level of capital in
the Ramsey model. Explain the difference between the two and how they relate to
each other. (25 points)
2. How are assets priced in the Consumption Capital Asset Pricing Model (Consumption
CAPM) Derive the risk premium for assets in this model and give economic intuition.
Use this model to explain the equity premium puzzle. (25 points)
3. Define the concept of Ricardian equivalence. Show how Ricardian equivalence holds
in the Ramsey-Cass-Koopmans model and give economic intuition. Discuss reasons
Ricardian equivalence might not hold in practice. (25 points)
3 of 3 END OF EXAMINATION
经济学｜ECON60111 THE UNIVERSITY OF MANCHESTER
MACROECONOMIC THEORY
Semester 1 2025/26最先出现在KJESSAY历史案例。