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Unformatted text preview: G s = T s + M s M s 1 p s (6) and iterate the procedure to obtain the intertemporal budget constraint of the government X s = t 1 R s t ( G s T s ) = M s 1 p s 1 + X s = t 1 R s t i s +1 1 + i s +1 M s p s (7) The simplest case is when G s = 0 for any s (this is the case we consider in the notes later on). In this case X s = t 1 R s t ( T s ) = M s 1 p s 1 + X s = t 1 R s t i s +1 1 + i s +1 M s p s (8) 1 Substituting into the intertemporal b.c. of the representative agent and considering that C is constant you get C = r 1 + r X s = t 1 R s t Y s (9) The more general case is the one you have in the notes (in this case we are not assuming that G s = 0 yet!). 2...
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 Spring '08
 MINETTI
 Macroeconomics

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