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Unformatted text preview: University of Minnesota Department of Economics Econ 3102 – 001: Intermediate Macroeconomics Homework 5 This problem set (PS) is due on Monday, December 8 at the beginning of class. The maximum score is 100 points. Be sure to review the Syllabus about homework assignments and their grading. Feel free to contact me via e-mail if you have specific questions about the HW assignment. Note that some Exercises have several parts, and each part may conceal more than one task for you. Be sure to answer every question thoroughly for full credit! Question 1 (15 points) Assume a two-period model where the representative consumer has income of 100 in the current period, income of 120 in the future period, and faces a world interest rate of 10 percent per period. The consumer always wishes to set current consumption equal to the future consumption, which implies perfect-complements preferences. : a) Suppose that current and future government expenditures are 15 and 20 respectively and government balances its budget each period. Determine consumption in the current and future periods, and the currentbalances its budget each period....
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- Summer '05