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Question 2.1 Write down the three budget constraints for periods at = 1, 2, 3. Hint: Notice that the budget constraint for period 1 is
Question 2.1 Write down the three budget constraints for periods at = 1, 2, 3. Hint: Notice that the budget constraint for period 1 is the same as in class. The budget constraint for period 2 is almost the same, only the left-hand side contains not only consumption :22 but also saving. The new constraint is the constraint in period 3. l Question 2.2 Express 52 from the budget constraint for period 3, and substitute it into the budget constraint for period 2. Now express 31 from the budget constraint for period 2 and substitute it into the budget constraint for period 1. Show that what you obtained is one intertemporal budget constraint that equalizes the present discounted value of consumption to the total wealth of the household
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