University of Minnesota
Department of Economics
Econ 3102: Intermediate Macroeconomics
Homework #4
This problem set is due on
Wednesday, July 20th
, 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
questions about the problem set.
Note that some Exercises have several parts. Be sure to answer every question
thoroughly
for full credit!
1 Problems (55 points)
Exercise 1 (35 points)
time in all periods
t
= 0, 1,.
in each period
h
, and an initial capital endowment,
k
0
.
Assume that the household±s utility function is timeseparable, and takes the form
U
(
C
0
; C
1
; :::; ‘
0
; ‘
1
; :::
) =
1
X
t
=0
t
u
(
C
t
; ‘
t
)
where
C
t
and
‘
t
denote consumption and leisure in period
t
,
u
(
;
) is a period utility function which is strictly
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 Summer '08
 Staff
 Economics, Macroeconomics, real labor productivity

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