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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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This note was uploaded on 07/25/2008 for the course ECON 813A taught by Professor Minetti during the Spring '08 term at Michigan State University.
 Spring '08
 MINETTI
 Macroeconomics

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