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*A number of individuals are born in every period. <math>N^{t}_t </math> denotes the number of individuals born in period t.
*<math>N^{t-1}_t </math> denotes the number of old people in period t. Since the economy begins in period 1, in period 1 there is a group of people who are already old. They are referred to as the ''initial old.'' The number of them can be denoted as <math>N_0 </math> .
*The size of the initial old generation is normalized to 1:
*People do not die early, so <math>N^{t}_t </math> = <math>N^{t}_{t+1} </math>.
*Population grows at a constant rate n:
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