A Real Intertemporal Model with Investment

A Real Intertemporal Model with Investment - A Real...

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A Real Intertemporal Model with Investment The Representative Consumer The representative consumer works and consumes in the current and future periods In each period, she has h units of time which she divides between work and leisure In the current period, the consumer earns real wage income w(h –l) , receives dividend income π, pays taxes T , and consumes C units of goods and l units of leisure In the future period, she earns real wage income w’(h –l’) , receives dividend income π , pays taxes T’ , and consumes C’ units of goods and l’ units of leisure The representative consumer takes the current (future) real wage w ( w’ ) and the real interest rate r as given The representative consumer’s lifetime budget constraint states that the present value of lifetime consumption equals the present value of lifetime disposable income Consumer’s Decision: The consumer chooses C, C’, l, and l’ to make herself as well off as possible Current Labour Supply
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  • Spring '11
  • Leatandre
  • Macroeconomics, representative, representative consumer, real wage income

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