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su11_3102_HW3 - University of Minnesota Department of...

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University of Minnesota Department of Economics Econ 3102: Intermediate Macroeconomics Homework #3 This problem set is due on Wednesday, July 13th , at the beginning of class. The maximum score is 105 points. Be sure to review the syllabus for details about problem sets and their grading! Feel free to contact me via e-mail if you have speci°c questions about the problem set. Note that some Exercises have several parts. Be sure to answer every question thoroughly for full credit! 1 Problems (65 points) Exercise 1 (30 points) Consider a two-period economy where we have a representative consumer, a representative °rm, and a gov- ernment. The representative consumer derives utility from a consumption and leisure in period 1 (denoted by C 1 , 1 , respectively), and consumption and leisure in period 2 ( C 2 , 2 ), according to the utility function U ( C 1 ; ‘ 1 ; C 2 ; ‘ 2 ) . The consumer±s time endowment consists of ° h hours each period, which she can devote either to work or leisure. If she decides to work, she supplies labor to the representative °rm and earns wage rates w 1 (for period 1 labor) and w 2 (for period 2 labor) per hour worked. She also enjoys a dividend income ° t
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