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According to life cycle theory with one-time change (eg: sudden immigration of refugees, war), what must be true about the connection between (i) the real
According to life cycle theory with one-time change (eg: sudden immigration of refugees, war), what must be true about the connection between (i) the real interest rate and the marginal product of capital on the one hand and (ii) the real interest rate and the marginal rate of substitution of young agents on the other hand? Explain. For item (ii) how does consumption growth for young agents relate to the marginal rate of substitution for a Cobb-Douglas consumer?
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