=Foundations of modern macroeconomics exercise and solutions manual
Author(s): Heijdra, Ben J.; Reijnders, Laurie S. M.; Romp, Ward E
Oxford University
The current book includes forty-seven intermezzos, of which sixteen are new. All of these have been extensively checked and streamlined. They are num- bered and carry an informative title. A List of Intermezzos is included in the preamble of the book which facilitates cross-referencing. The numbering sys- tem is as before, with the first digit denoting the chapter in which the inter- mezzo is located. The new intermezzos are 1.1, 1.2, 5.1, 5.2, 8.2, 8.3, 9.1, 12.2, 13.3, 16.1, 17.1, 18.1, 18.2, 19.1, 19.2 and 19.3.
• The new Chapter 2 deals exclusively with the open economy. It follows logi- cally from the first chapter and contains material from Sections 1 and 2 of the old Chapter 10.
• Chapter 3 is a rewritten version of the old Chapter 2.
• Chapter 4 has been renamed to better reflect its contents. It contains a rewritten version of the old Chapter 4 as well as Section 3 (on the Dornbusch model) from the old Chapter 10.
• Chapter 5 is an expanded and rewritten version of the old Chapter 3. It now includes a small open economy model and explains the Dynare software pack- age that can be used to solve rational expectations models.
• Chapter 6 is a lightly rewritten version of the old Chapter 5.
• Chapter 7 is a thoroughly edited and shortened version of the old Chapters 6 and 7. It also contains some new material on union- and efficiency-wage models in general equilibrium.
• Chapter 8 is an expanded version of the old Chapter 8. It now contains a section on endogenous job destruction.
• Chapter 9 has been renamed to better reflect its contents. In addition it has been expanded and now includes a discussion of dynamic inconsistency of individ- ual choices resulting from present-biased (or quasi-hyperbolic) preferences.
• Chapters 10 and 11 are lightly edited versions of the old Chapters 11 and 12. • The old Chapter 12 (on exogenous growth) has been split into two much ex-
panded chapters. The new Chapter 12 deals exclusively with Solow-Swan style growth models. It has been expanded somewhat and now also features a sec- tion of the two-sector Meade-Uzawa model.
• Chapter 13 contains Sections 13.5–13.7 from the old Chapter 13. In addition it has been expanded dramatically. It now includes models with endogenous labour supply (using material from the old Chapter 15), search unemployment, and money balances entering the felicity function. This is the pivotal chapter in the book as the Ramsey-Cass-Koopmans model that it covers in all its guises plays a central role in the material that follows from there on.
• Chapter 14 is a lightly edited version of the old Chapter 14. Similarly, Chapters 15 and 16 are lightly edited versions of the old Chapters 16 and 17.
• Chapter 17 is brand new. It provides a brief (and mostly intuitive) discussion of the method of dynamic programming (DP). In addition it introduces the con- cept of complete markets and shows how one can construct a “representative
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