Consider the infinite horizon RBC model with uncertainty developed in class where the representative consumer and firm are assumed to have rational expectations. The consumer has following expected lifetime utility: Eost {log (C₂) + 1 log(lt)} ŋ>0, and ß € (0,1), t=0 wher C, is consumption and 1, is leisure. The consumer's lifetime budget constraint looks like: Ct II 0(1+rs) ² • wƒ (h − 1;) + II; − Tt II(1+rs) + So where h> 0 denotes total hours available for either work or leisure; w, is the wage rate; II. denotes the dividend/profit payments: T. denotes lump-sum taxes: r. is the interest rate

Consider the infinite horizon RBC model with uncertainty developed in class where the representative consumer and firm are assumed to have rational expectations. The consumer has following expected lifetime utility: Eost {log (C₂) + 1 log(lt)} ŋ>0, and ß € (0,1), t=0 wher C, is consumption and 1, is leisure. The consumer's lifetime budget constraint looks like: Ct II 0(1+rs) ² • wƒ (h − 1;) + II; − Tt II(1+rs) + So where h> 0 denotes total hours available for either work or leisure; w, is the wage rate; II. denotes the dividend/profit payments: T. denotes lump-sum taxes: r. is the interest rate

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.1P

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