Consider the decision problem of a representative household optimally choosing a sequence of consumption {(3,} and asset holdings {am} over an innite horizon, taking as given the real interest rate r (assumed to be constant), the initial wealth a9, and the sequence of labor income {32,}. The household's preferences are represented by EoZtqu'r) where B E l/(1+p) , p>0. { Take the utility function to be \"(0) = \"Ct (1/ 2M2 for 0 S ct