Final Equations

Question 1

Consumer’s budget constraint for leisure/labor

Answer 1

Consumption = Wage(24 - Leisure hours) + Dividend Income - Taxes

Question 2

Optimal point for consumer (leisure, consumption)

Answer 2

MRS l,c = w or (MU l / MU c)

Question 3

Firm’s production function

Answer 3

Output = total factor productivity * production function with capital and labor

Question 4

Government budget constraint

Answer 4

Government spending = taxes

Question 5

Income-expenditure identity

Answer 5

Output = Consumption + Government spending

Question 6

Current budget constraint for consumer

Answer 6

Consumption + Savings = Income - Taxes

Question 7

Future budget constraint for consumer

Answer 7

Future consumption = Future income - Future taxes + Return on savings

Question 8

Lifetime wealth

Answer 8

we = Current consumption + Present value of future consumption

Question 9

Present-value budget constraint

Answer 9

Current income - Current taxes + Present value of future disposable income

Question 10

Government present budget constraint

Answer 10

Spending = Taxes + Debt

Question 11

Government future budget constraint

Answer 11

Future spending = Taxes - Paying back debt + interest

Question 12

Optimal point for firm (labor)

Answer 12

Marginal product of labor = wage

Question 13

Optimal point for consumer (consumption/future consumption)

Answer 13

MRS c,c’ = 1 + r or (MU c / MU c’)

Question 14

:)

Answer 14

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