Problem
Letea is a three-period model economy. Each period, there are 200 people born, and each person receives 170 goods when young. People would like to consume in subsequent periods, and they can store goods in the bank in the current period to receive one to one good in the next period. People can also invest in capital. The rate of return of capital is 0.5 for the first period and 1.25 for the second period. In Letea, 25 percent of people want to consume when middle aged and the rest want to consume when old. (i) How many goods will be held in storage (in the bank) and how many goods will be stored in capital? (ii) How many goods will middle aged people consume? (iii) How many goods will old people consume?