Longer retirements. People are living longer than ever before. However, the retirement age in most countries remains mostly unchanged. Consider the consequences of this change in the following OLG economy where people live three periods. Assume that people work in the first period and earn labour income At wt and live off of their savings plus interest income in periods two and three. The household utility maximization problem is given by Max U = InC1,t + BlnC2,t+1+B² In C3,t+2 s. t. C₁,t + St= Atwt, C2₁t+1+St+1 = (1 + rt+1) St, C3,t+2 = (1 + rt+2) St- A. Write out the lifetime budget constraint of the household.

Longer retirements. People are living longer than ever before. However, the retirement age in most countries remains mostly unchanged. Consider the consequences of this change in the following OLG economy where people live three periods. Assume that people work in the first period and earn labour income At wt and live off of their savings plus interest income in periods two and three. The household utility maximization problem is given by Max U = InC1,t + BlnC2,t+1+B² In C3,t+2 s. t. C₁,t + St= Atwt, C2₁t+1+St+1 = (1 + rt+1) St, C3,t+2 = (1 + rt+2) St- A. Write out the lifetime budget constraint of the household.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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