Note:there are no Banks in the economy and the Central Bank is content to set the real interest rate arbitrarily, and on the side of the firms, they do not accumulate capital and are content to maintain the existing capital stock thanks to self-financing. Only households and the government have intertemporal behavior. households start with an initial wealth of B0 bonds, which here therefore corresponds to the government's initial debt. Firms: Firms are competitive but only make static choices. Thus, they choose the working hours in each period Ldt, t = 1.2, which they pay at the nominal hourly wage rate Wt, t = 1.2, generate nominal profits ?t, t = 1.2, qu 'they use in part to maintain the existing capital stock thanks to self-financing, so that on each date the investment is given by PtIt = ?PtKt, ??and that it is financed by retaining part of the profits: PtIt = Self-financing and the rest of the profits are redistributed to owner households.

At equilibrium, i.e., all agents have maximized their objective function and the markets are balanced. 1-State and prove Ricardo's Equivalence Theorem. 2-Write the household consumption function at equilibrium, showing the current income and the future income. Describe precisely, using your knowledge of Permanent Income Theory, the effect of a decline in current income Y1 on consumption and savings. 3-Find the equation of the YIS curve as in the course, by describing your approach . 4- Represent graphically the balance of the economy in the plan (Y, r) then, describe the effect of a decrease in future public spending (32