1 Planner’s Discounting Suppose that the planner discounts the utility of future generations at the common rate σ. How does the level of public debt decided by a government who aims to achieve the planners’ optimal is affected by different values of σ? Show the mathematical condition and provide economic intuition. (Hint: the optimal steady state we saw in class implicitly assumed that the planner was placing the same weight to all generations. You have to relax this assumption.)

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