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I understand that I must stay within view of my camera while testing

Suppose the representative household knows the government’s intertemporal budget constraint must hold. Combine this information with the household’s consumption function that you derived above. Is consumption still a function of taxes?

Aggregate expenditure is . Plug in your expression for the consumption function (assuming the household knows the government’s intertemporal budget constraint must hold) to derive an expression for .

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

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

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 significant implications of Rational Expectations? Name at least one.

Graphically depict the optimality condition. Carefully label the intercepts of the budget constraint. What is the slope of the indifference curve at the optimal consumption basket,

Graphically depict the equilibrium of the economy using the five-part graph. Suppose that there is an increase in . Show how and react to the increase in . (Use Desmos to answer this question.)

Suppose the second-period consumption is taxed at a rate