Bring out the salient features of Ramsey model for decentralized households (your answer should include the assumptions, important equations, phase diagram and its interpretation). In what respect is it different from the Solow model?
Answers
Answered by
0
The two equations of Ramsay Model for decentralised households are -
1. Law of Motion for capital accumulation.
2. Savings behaviour of households.
This model assumes that there are only two agents - Households and firms but government does not take part in the business.
Ramsey model can be interpreted in a way that labour is supplied to firms by households which also acts as shareholders of the firm.
Similar questions