– Assignment 4 –

Discrete Optimal Control

– Due date: November 14th, 2022

– Due date: November 28th, 2022
– Group: 2.16 (GEL/GNF/GEA)

Name: _______ Surname: ________________ DNI: _______

Name: _______ Surname: ________________ DNI: _______
Name: _______ Surname: ________________ DNI: _______

Exercise 1
– 10 points –

Assume that the mean tax rate, F t, in a country that maximizes the growth, Gt ,
over T years is such that the step variation rate of the growth rate is negatively
proportional to the square of the tax rate itself, so that the problem statement that
maximizes the country’s growth is:

(∑ )
T
G¿ =max Gt
{ F (t )} i=1

{Gt +1∧¿ Gt −α ( F t−F 1 ) ( Ft −F 2 )

G ( 0 )∧¿ G0 ,G t=T =GT =free
0 ≤ Ft ≤ 1 , 0≤ Gt ≤ 1
where G0=1/100 is the country’s initial growth rate, α =1/100 is a coefficient obtained
from a regression study of the country’s historic growth and fiscal policy and F 1=1/3
and F 2=2/3 are the fiscal policy thresholds under and over which growth is penalized
according to an economic model.
Assuming T ∈ R+¿¿ (finite), answer the following questions:
a. State the equations that solve the problem with the boundary
conditions.
b. Solve the state and control variables over time and sketch their
evolution.
c. Compute the total growth accumulated over the whole period, starting
at the first year and for T =4 years.