Exercise: The Euler Equation Ct1=[Ct+1Ai+1Ki+11Lt+11+1] (2) Questions 1. Explain words why the left-hand side of equation (2) represents the marginal cost to the household of awing (ia, buliding new capian. A camplete answer will make use of the term marginal utiaty. 2. Explain words why the right-hand side of equation (2) represents the marginal benetit to the household of saving. A cornpinte anvwe will mase ise of the terms maginal utility and marginal product. 3. Holding everything else constant, according to equation (2), what etfect will an increase in TFP in period t+1 have on the housetielst choce ior capital in period t+1 ? Explain the economic intuition behind your answor. 4. Holding everything else constant, according to equation (2), what effect will an increase in consumption in period t have on the housenoles choice tor capital in period t+17 Explain the economic intuition behind your answer. 5. Holding everything else constant, according to equation (2). What effect will an increase in consumption in period t+1 have on the housenelds choice for capital in period t+17 Explain the economic intuition behind your answer. Exercise: The Euler Equation Ct1=[Ct+1Ai+1Ki+11Lt+11+1] (2) Questions 1. Explain words why the left-hand side of equation (2) represents the marginal cost to the household of awing (ia, buliding new capian. A camplete answer will make use of the term marginal utiaty. 2. Explain words why the right-hand side of equation (2) represents the marginal benetit to the household of saving. A cornpinte anvwe will mase ise of the terms maginal utility and marginal product. 3. Holding everything else constant, according to equation (2), what etfect will an increase in TFP in period t+1 have on the housetielst choce ior capital in period t+1 ? Explain the economic intuition behind your answor. 4. Holding everything else constant, according to equation (2), what effect will an increase in consumption in period t have on the housenoles choice tor capital in period t+17 Explain the economic intuition behind your answer. 5. Holding everything else constant, according to equation (2). What effect will an increase in consumption in period t+1 have on the housenelds choice for capital in period t+17 Explain the economic intuition behind your