Transcription of Macroeconomic Theory
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Macroeconomic TheoryDirk Krueger1 Department of EconomicsUniversity of PennsylvaniaJanuary 26, 20121I am grateful to my teachers in Minnesota, Chari, Timothy Kehoe and Ed-ward Prescott, my ex-colleagues at Stanford, Robert Hall, Beatrix Paal and TomSargent, my colleagues at UPenn Hal Cole, Jeremy Greenwood, Randy Wright andIourii Manovski and my co-authors Juan Carlos Conesa, Jesus Fernandez-Villaverde,Felix Kubler and Fabrizio Perri as well as Victor Rios-Rull for helping me to learnmodern Macroeconomic Theory . These notes were tried out on numerous students atStanford, UPenn, Frankfurt and Mannheim, whose many useful comments I appreci-ate. Kaiji Chen and Antonio Doblas-Madrid provided many important corrections tothese Overview and Summary12 A Simple Dynamic General Principles for Specifying a Model .. An Example Economy .. De nition of Competitive Equilibrium .. Solving for the Equilibrium .. Pareto Optimality and the First Welfare Theorem.
11 Fiscal Policy 293 ... lot of interesting questions involving distributional aspects of government policy. In the next section we will discuss a model that is capable of addressing these ... of government policies can be analyzed, but it also makes the state space very big. A cross-sectional distribution as state variable requires new ...
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