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Unformatted text preview: endowment point then the consumer is a lender. I= nominal interest rate in dollars R= real interest rate in terms of goods 1 + r = (1 + i) / (1 + pi) p1c1 + (p2c2/(1+i)) = (y1)+ y2/(1+i) c1 + (p2/p1(1+i))c2 = (y1/p1) + y2/(p1(1+i)) Sept 18 p. 29 close to question in problem set When lump sum use additive terms When restrictive then use budget constraint Net rate of return(S(t + 1) + D(t+1) S(t))/S(t) S(t) = [Beta * lambda(t+1) / lambda(t)] * [S(t+1) + D(t+1)] Question 4.a of problem set: t1=1.78...
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This note was uploaded on 10/11/2010 for the course ECON 325 taught by Professor Federico during the Winter '10 term at University of Maryland Baltimore.
 Winter '10
 Federico
 Macroeconomics

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