Derive the Euler equation, which relates the marginal rate of substitution between and .

Consumption-Savings Decisions Consider a consumer with a lifetime utility function

What are the significant implications of Rational Expectations? Name at least one.

Which one of the following is false with Ricardian Equivalence?

Derive the equations for the IS curve and the  curve. Hints: IS curve is a set of pairs, where households and firms behave optimally concerning consumption, investment demand, and income equals expenditure. curve is a set of pairs where households and firms behave optimally, the labor market clears, and the production function holds.

Combine the two budget constraints into a single lifetime budget constraint.

What is the key cause of business cycles in the original Real Business Cycle Theory?

Endowment Equilibrium and Fiscal Policy Suppose that we have an economy with many identical households. There is a government that exogenously consumes some output ( and ) and pays for it with lump-sum taxes ( and ) or debt (). Lifetime utility for a household is:

What are the two within-period budget constraints for the government? Combine the two within-period budget constraints for the government into one intertemporal budget constraint.

Production Equilibrium of the Neoclassical Model The following conditions must hold in the Production Equilibrium of the Neoclassical Model: