3. Comparing optimal consumption with complete and incomplete markets. Consider a two-period small open endowment economy facing

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3. Comparing optimal consumption with complete and incomplete markets. Consider a two-period small open endowment economy facing the world interest rate r for riskless loans. Date 1 output is Y. There are 8 states of nature on date 2 that differ according to the associated output realizations Y2(s) and have probabilities (s) of occurring. The representative domestic consumer maximizes the expected lifetime utility function?

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Foundations Of International Macroeconomics

ISBN: 9780262150477

1st Edition

Authors: Maurice Obstfeld, Kenneth S. Rogoff

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