OLG Flashcards
1
Q
What do individuals want to do in OLG model?
A
- Consume in both periods
- Maximise their lifetime utility subject to constraints
2
Q
Why can’t the young and old trade directly?
A
No double coincidence of wants (Young has what old want but not other way round)
3
Q
What 2 conditions are required for the possibility of trade with credit?
A
- Perfect record keeping
- Full commitment
4
Q
Why is a stationary equilibrium important for the social planner problem?
A
Means views about the future are the same across generations
5
Q
What are the assumptions in a monetary equilibrium?
A
- Money is valued
- Markets clear (S=D)
6
Q
What happens to lifetime BC when vt+1/vt=1?
A
Is same as social planner (is optimal)
