Ramsey-Cass-Koopmans Growth Model

📋 Course Outline

1. RCK Model Motivation and Assumptions
2. Households, Population, and Utility
3. CRRA Preferences and Risk Aversion
4. Two-Period Consumption Choice
5. Continuous-Time Euler Condition
6. Assets, Firms, and Factor Incomes
7. Intertemporal Budgets and Solvency
8. Steady State and Capital Dynamics
9. Phase Diagram and Saddle Path
10. Golden Rule and Patience
11. Government and Ricardian Equivalence
12. Government Spending Shocks

📖 1. RCK Model Motivation and Assumptions

🔑 Key Concepts & Definitions

• RCK model : endogenizes saving by allowing individuals to choose consumption and saving according to their preferences and incentives.

📌 The Solow model cannot analyze the efficiency of different growth paths or compare welfare between steady states because its saving rate is exogenous.

• In the RCK model, the saving rate varies over time and depends on patience, interest rates, preferences, and new information such as expected tax changes.