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First derive the Euler equation relating consumption at time t and t + 1, recall the foc for ct and kt are: Btuc (Ct, mt)
First derive the Euler equation relating consumption at time t and t + 1, recall the foc for ct and kt are: Btuc (Ct, mt) - At = O - At + At+1 [1 + f'(kt)] = O Substituting the foc for c into foc for k for 1, we have Uc(Ct, mt) = B[1+ f'(kt)] uc(Ct+1, mt+1) (14)
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