4. Consider the above two-periods endowment economy. Suppose there are identical agents but with different endowments. There are a number of L₁ Type 1 agents with endowments Y (1) = 1, Yt+1(1) = 0, and a number of L₂ type 2 agents with endowments Y (2) = 0, Yt+1(2) = 1. Then a. At time t, type 1 agent has more consumption than type 2 agent b. At time t, type 2 agent has more consumption than type 1 agent c. Since this is an endowment economy, saving must be zero: type 1 agent will have 0 consumption at t+1 d. The equilibrium interest depends on individual income heterogeneity

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4. Consider the above two-periods endowment economy. Suppose there are
identical agents but with different endowments. There are a number of L₁ Type
1 agents with endowments Y₂ (1) = 1, Yt+1(1) = 0, and a number of L₂ type 2
agents with endowments Y (2) = 0, Yt+1(2) = 1. Then
a. At time t, type 1 agent has more consumption than type 2 agent
b. At time t, type 2 agent has more consumption than type 1 agent
c. Since this is an endowment economy, saving must be zero: type 1 agent will
have 0 consumption at t+1
d. The equilibrium interest depends on individual income heterogeneity
Transcribed Image Text:4. Consider the above two-periods endowment economy. Suppose there are identical agents but with different endowments. There are a number of L₁ Type 1 agents with endowments Y₂ (1) = 1, Yt+1(1) = 0, and a number of L₂ type 2 agents with endowments Y (2) = 0, Yt+1(2) = 1. Then a. At time t, type 1 agent has more consumption than type 2 agent b. At time t, type 2 agent has more consumption than type 1 agent c. Since this is an endowment economy, saving must be zero: type 1 agent will have 0 consumption at t+1 d. The equilibrium interest depends on individual income heterogeneity
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