In the two-period model, if a consumer has preferences with the perfect complements property, who always chooses current consumption and future consumption according to c'= 2c. Assume that the real interest rate is 2%, calculate the future consumption. 2.04 1.02-t)+ 1.02 O-t') c' (y-t)+ -t') 1.02 None of the other answers is correct. 2.04 y-t)+ 3.02 3.02 -t) 1.02 3.02 -t)+; (y'-t') 3.02

In the two-period model, if a consumer has preferences with the perfect complements property, who always chooses current consumption and future consumption according to c'= 2c. Assume that the real interest rate is 2%, calculate the future consumption. 2.04 1.02-t)+ 1.02 O-t') c' (y-t)+ -t') 1.02 None of the other answers is correct. 2.04 y-t)+ 3.02 3.02 -t) 1.02 3.02 -t)+; (y'-t') 3.02

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 12P

See similar textbooks

Similar questions

A typical worker will earn £300k in their youth and £600k in middle-age.. lifetime, they must choose between two "goods": consumption in their youth and consumption in middle-age. When young, the worker has the option of putting their earnings in the bank at an interest rate of 0% - these savings can then be spent in middle-age. Alternatively, they can borrow money from the bank when young. This loan must be paid back in middle-age at a 100% interest rate. (a) What is the maximum amount of money the worker can borrow when young? (b) Draw a large graph with "consumption when young" on the vertical axis and "consumption in middle-age" on the horizontal axis. Represent the worker's budget set. Note: both axes should be labelled from £0 to £1,000k. (c) The government wishes to stimulate spending, and writes a law to reduce the interest rate from 100% to 0%. On the same graph, show the effect of this policy on the worker's budget set. Show the effect of this change on consumption for…
Mariel teaches science at a community college in Arizona. Her starting salary in 2003 was $39,800, and each year her salary increases by 3%. (a) Complete the table of Mariel's salary. (Round your answers to the nearest cent.) Years Year since 2003 Salary (S) 2003 $39,800 2004 2005 2006 2007 (b) Find an exponential growth model S() for Mariel's salary t years after 2003. st) - What is the growth factor? (c) Use the model found in part (b) to predict Mariel's salary in 2012, assuming that her salary continues to increase at the same rate. (Round your answer d) Vse a graphing calculator to graph the model you found in part (b) together with a scatter plot of the data in the table.
Expected Rate of Return, r, and Real Interest Rate, I (%) A Investment ($B) Multiple Choice O Refer to the diagrams. Other things equal, curve B will shift upward when O Investment ($B) O Real Domestic Product, GDP ($B) the interest rate increases. the level of GDP increases. -B curve A shifts to the right. curve A shifts to the left.
Assume an economy with 1,000 consumers. Each consumer has income in the current period of 50 units and future income of 60 units and pays a lump-sum tax of 10 units in the current period and 20 units in the future period. The market real interest rate is 8%. Of the 1,000consumers, 500 consumer 60 units in the future, while 500 consumer 20 units in the future. a) Determine each consumer's current consumption and current saving. (b) Determine aggregate private saving, aggregate consumption in each period, government spending in the current and future periods, the current-period government deficit, and thequantity of debt issued by the government in the current period. (c) Suppose that current taxes increase to 15 units for each consumer. Repeat parts (a) and(b) and explain your results.
1. Why 0% interest would rebuild ERI (Economic Responsibility Investing) economies? ... [3 lines max]
The permanent income hypothesis is consitent with cross-section and time-series data because a. higer-income households are savers, since their current income includes positive transistory conponents. O b. higer-income households are savers, since their current income includes negative transistory conponents. c. lower-income households are dissavers, since their current income includes positive transistory components. O d. lower-income households are savers, since their current income includes negative transistory conponents.
Julie lives for two periods. She works in the first, saves some of her income, and retires inthe second and lives off her savings. For every coconut she saves today, she earns an interestrate of r = 2%. Julie’s generation comprises of 1,000 people and each generation grows byn% relative to the previous one.a. In the first period Julie saves 100 coconuts for retirement. How many coconuts will shehave when she retires?b. Now suppose that the government implements a pay-as-you-go social security system,forcing every person in Julie’s generation to pay 100 coconuts to a social security fund thatwill distribute the money to the currently old. In exchange, when Julie retires each youngperson will pay 100 coconuts to the social security fund, and the revenue will be dividedequally among the future retirees. How much will be the revenue of the social securitysystem, and how many coconuts will each retiree will receive?c. What will have to be the range of values for n so that the government’s…
TECHNICAL Suppose that permanent income is calculated as the average of income over the past five years – that is YP = (Y + Y-1 + Y-2 + Y-3 + Y-4 Suppose further that consumption is given by C = 0.9YP a. If you have earned $20000 per year for the past 10 years. What is your permanent income? b. Suppose that next year (period t + 1) you earn $30000. What is your new YP? c. What is your consumption this year and next year? d. What is your short run MPC and long run MPC? e. Assuming you continue to earn $30000 starting in period t+ 1, graph the value of your permanent income in each period using the initial YP equation provided above.
I. EOQ Model Suppose during your college life, every year you need $5,000 cash to spend in addition to the studying expenses. Each time in need of cash, you decide to go to the bank for that. And the transportation costsyou $5 (assumed amount) of going to the bank and coming back. Assume that the current saving/checking link account has an interest rate of 5%. Please find the optimal solution of the amount of cash each time for the withdraw.
Q.3.4 Year (Base year) 2018 2019 2020 2021 Cost of a basket (R) of consumer goods/services Explain, with the aid of an equation, the components of the consumption function. 1850 2190 2380 2560
PLS HELP ME TO ANSWER THIS IN YOUR OWN WORDS THANK YOU: What is your expectation for this school year 2021-2022?
2. Dan lives for only two periods. He earns real income m, in the present and mf in the future. His utility function is U(Cp,C) =6C,2/Cf. The market real interest rate is r. (a) Suppose that Dan initially cannot borrow or save. Using a diagram, illustrate and explain the case where Dan would be better off saving. (b) Now suppose that Dan can borrow and save at the market interest rate : Determine the equations for consumption in both periods and savings that maximize Dan's utility. (c) Now consider the special case where Dan earns m, in the present and is retired in the future so that mf=0. If the interest rate rises, will his present and future consumption increase, decrease, or stay the same? Will the increase in the interest rate make him save more or less? Illustrate this in a diagram. Explain your answer in reference to the income and substi tution effects. (d) Following from (c), suppose instead that Dan is eligible to receive a government pension when he retires. Illustrate and…