Exercise 14.20. * Consider the model discussed in subsection 14.2.2. (1) Choose a functional form for η (·) such that equations (14.30) have solutions L1 R and L2 R 6= L1 R. Explain why, when such solutions exist, there is a perfect foresight equilibrium with two-period endogenous cycles. (2) Show that even when solutions exist, there also exists a steady-state equilibrium with constant research. (3) Show that when such solutions do not exist, there exists an equilibrium which exhibits oscillatory transitional dynamics converging to the steady state characterized in 2 above.