Consider a two period economy, 1' = U, 1, with a credit good c2 and a cash good CI. The ow utility is MW) (L) +% (L) rm where ii {I } is
What's the intratemporal conditons and intertemporal condition? Please show me the workingout how to get answer of part b.
Consider a two period economy, 1‘ = U, 1, with a credit good c2 and a cash good CI.The flow utility is MW) (L) +% (L) rm where ii {I } is differentiable, strictly increasing and strictly convex. Let {3 c: 1 denotethe discout factor. In each period, consumers supply labor It, and the productionfunction is yr = .11 t,- where rt “:9 U. The government needs gt 2?: [l amounts of goods in each period. It canraise revenue through three government instruments: lump-sum tax T, governmentbonds B and money M. l_et (pt, wt] denote the nominal price level and nominalwage for period tand i1 denote the nominal interest rate. The initial level of nominalassets [33, Mn) is given. Please answer the following questions. a. Define the competitive equilibrium of this economy. (You need to write out theconsumer’s problem.) b. Write down the intratemporal conditions and intertemporal conditions. (Thereare two intratemporal conditions.)
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