Question: I I I It) MIU Model: Consider the, representative household ill the Money ill-tile,- Utility tnodel, who ehoos * a path of consumption, leisnrc, and

I I I It) MIU Model: Consider the, representative household ill the Money ill-tile,- Utility tnodel, who ehoos * a path of consumption, leisnrc, and nominal money balances over an innite horizon. (cunlwnMy tion: 1,, to maximize the following objective func7 via' e" (313')1m+dlrl(l ) 7 a, Pm .i. to where 1 > a > 0 and o > 0 are exogenous preference parameters. and H is a discount factor. The household faccs the following nominal budget constraint. each period: Pic, + A, + MP : (1 + MAM + MB. + Wm, where, P, is the aggregate price level, A! is nominal wealth. it is the, nominal interest rate, W, is the nominal wage rate. and m is labor Suppl The household also faces a unitary time endowment which holds each period so that l : l, 47 m The, representative rm chooses labor and capital to produce outputl Ill nominal terlns: 'x: max Profit 7 20 + homes, (dank!) 7 Romeo 7 unmet} l", i. honor,\" M, where 0

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