Consider the sequential trading model

Reference no: EM131136045

Consider the sequential trading model discussed in Section 5.8 and suppose now that households can trade bonds at time t that deliver one unit of good t at time t' . Denote the price of such bonds by qt,t'.

(a) Rewrite the budget constraint of household h at time t, (5.23), including these bonds.

(b) Prove an equivalent of Theorem 5.8 in this environment with the extended set of bonds.

Reference no: EM131136045

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