c i : consumption of an individual in Period i, i = 1, 2.

D: consumption of an individual in Period 0, which is constant.

p i : the price of the good in Period i, i = 1, 2.

ρ = p 2 p 1 : (expected) inflation rate (plus one).

W: nominal wage rate.

R: unemployment benefit for an unemployed individual. R = D .

D ^ : consumption in the childhood period of a next generation consumer.

Q: pay-as-you-go pension for an individual of the older generation.

Θ : tax payment by an employed individual for the unemployment benefit.

Q ^ : pay-as-you-go pension for consumers of the younger generation when they retire.

Ψ : tax payment by an employed individual for the pay-as-you-go pension.

Π : profits of firms which are equally distributed to each consumer.

L: total employment.

L f : population of labor or employment during the full-employment state.

y ( L ) : labor productivity, which is deceasing or constant with respect to the employment, y 0 .