- 1 Euler Equation A Representative Household Maximizes Where Problem Set Et Log Ct J C J 1 Xhe J J 0 C J Ki J W 1 (25.81 KiB) Viewed 42 times
1 Euler equation A representative household maximizes where Problem Set Et log(Ct+j - C₁+j-1) - Xhe+j] j=0 C₁+j+Ki+j=w₁+
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1 Euler equation A representative household maximizes where Problem Set Et log(Ct+j - C₁+j-1) - Xhe+j] j=0 C₁+j+Ki+j=w₁+
1 Euler equation A representative household maximizes where Problem Set Et log(Ct+j - C₁+j-1) - Xhe+j] j=0 C₁+j+Ki+j=w₁+je+j+re+jK₁+j−1+II+j - T. 1. Discuss economic intuitions behind the term with 0. 2. Define Lagrangian. 3. What are the variables that are optimized or control variables? 4. Derive the first-order condition(s). 5. Derive (a) the labor supply condition; and (b) the Euler equation with respect to consumption. 6. Discuss (a) how the past consumption influences today's consumption; (b) how the real interest rate influences today's consumption. (e) how the real wage influences labor supply. (1) (2)