Heterogeneous Agents

Question 1

Which of the following statements on households at the borrowing constraint is true?
A) They consume at least their total income.
B) They always save at least a small amount.
C) They cannot be at the borrowing constraint again in the next period.
D) None of the above.

Answer 1

A) They consume at least their total income.

Question 1

Consider the following Markov transition matrix:
P = 0.1 0.9
0.9 0.1

Which of the following statements is false:
A) This Markov process is ergodic.
B) The current state is persistent.
C) The probability of starting from state 1, and remaining there for two periods in a row, is 1 percent.
D) From any state, the probability of switching state twice in a row is 81
percent.

Answer 1

B) The current state is persistent.

Question 2

According to Heathcote et al. (2010), which of the following things has not happened in the last decades in the US?
A) Income inequality has substantially increased.
B) Wage inequality has substantially increased.
C) The gender wage gap has decreased.
D) Low-paid workers’s real wages have increased.

Answer 2

D) Low-paid workers’s real wages have increased.