Consider the real inter temporal model with investment now focus specifically on the representative firm in this model.
1. What does the representative firm maximize in this 2-period model? Use words and symbols.
2. State one of the firm's three optimality conditions and explain why your chosen condition must hold in the equilibrium.
3. Suppose there is a shock such that the representative firm is considered 'risker' and faces higher borrowing costs in the current period. How does this effect the following equilibrium variables: K', w', N',and Y'?