# Intertemporal Model Macroeconomics

Basically, I have the full intertemporal model (the two period model) with the consumer, firm, and government, complete with the investment. And there is this question: Determine an equilibrium path with the case in which workers have a preference shock that reduces the disutility from work $h-l$ in first period. Preferences are back to normal in second period. Note: $h$ is the number of hours available to work, $l$ is the number of hours spent on leisure, so essentially $h-l$ is the number of hours spent working.

What is this question trying to ask? If I understand the question, I probably will be able to answer.

## 1 Answer

You just have to write down some utility function that changes in each period, in the first there should be an additional term (shock) a constant multiplicative on the disutility of work that reduces it, and then in the second period this constant becomes one. A dynamic model solution is a vector of $(l^*_1,l^*_2)$ of the equilibrium hours of work that the consumer chooses according to her preferences, and restrictions.

• what do you mean by that? putting a constant multiplicative? does that mean that for example we have a utility U(l, c), because of this disutility, we have aU(l,c)? The thing is the question does not have any equation, making it confusing. – Skipe May 1 '15 at 12:12
• you need a utility for work and consumption in time $U(l_1,l_2,c_1,c_2)$, assume it is separable in time $U_1(l_1,c_1)+U_2(l_2,c_2)$ and then... – user157623 May 1 '15 at 16:03