1. Final Review Closed book, closed note, you can bring calculator Focus more on the lectures after midterm Content: Everything We have learned so far Tue

2. 1 Static Economy The representative consumer’s problem and firm’s problem Understanding the optimization conditions Define equilibrium and SPP and Why they are equivalent Effect from Government spending and TFP

3. The Optimization Conditions

4. Effect from G increase

5. 2 Consumption and Saving In a two-period model with consumption- savings choice, what is the consumer’s lifetime budget constraint? What is the optimal condition for consumer’s intertemporal choice?

6. Lifetime budget constraint How do we derive this budget constraint?

7. The optimal condition Special case, perfect complement Lender and borrower

10. 3 Basic assumptions in Chap 10 N=h-l increases when w increases. Here we assume the substitution effect of a change in w is always larger than the income effect. N increases when the real interest rate r increases. w(1+r)/w’ is the current price of leisure relative to the future price of leisure. And we assume again the substitution effect is larger than the income effect. N decreases when the lifetime wealth increases. Because leisure is the normal good.

11. Current consumption will decrease if real interest rate r increases by assuming the substitution effect dominates. Holding constant Y and r, if lifetime wealth increases, current consumption increases.

12. Figure 9.2 An Increase in the Real Interest Rate Shifts the Current Labor Supply Curve to the Right

13. Figure 9.3 Effects of an Increase in Lifetime Wealth

14. 4 understanding supply and demand curve Derivation of output supply and output demand curve Both of them are about the real interest rate and output

15. Figure 9.12 Construction of the Output Supply Curve

16. Figure 9.16 Construction of the Output Demand Curve

17. 5 Equilibrium analysis Equilibrium effect from government spending, TFP, and capital sock

18. Figure 9.19 A Temporary Increase in Government Purchases

19. About the future government spending increasing Homework question

20. Figure 9.22 The Equilibrium Effects of a Decrease in the Current Capital Stock

21. Figure 9.23 The Equilibrium Effects of an Increase in Current Total Factor Productivity

22. Figure 9.24 The Equilibrium Effects of an Increase in Future Total Factor Productivity

23. 6 Growth Model

24. 7 Open Economy Analyze current account, consumption, investment in small open economy