Reference no: EM131292988
A household's income in the current period is y = 95, and income in the future period is y′ = 115. The household pays lump-sum taxes t = 15 in the current period and t′ = 10 in the future period. The real interest rate r is 0.05, or 5%, per period.
1. Determine the household's lifetime wealth.
2. Suppose that household's preferences are such that it wants to have equal consumption in both periods, meaning c = c′. Determine what the household's optimal current-period and future-period consumptions are, and what optimal saving is. Round up your answers to the second decimal. Is the consumer a lender or a borrower?
3. Now suppose that instead of y = 95, the consumer has y = 140. Again, determine optimal consumption in the current and future periods and optimal saving. Round up your answers to the second decimal. Is the consumer a lender or a borrower? Explain how things change compared to Part (2).
4. ) Go back to y = 95. Now, suppose the real interest rate increased to r = 0.1. Determine the household's lifetime wealth, optimal current-period consumption, optimal future period consumption, and optimal saving using the same assumption that household's preferences are such that it wants to have equal consumption in both periods. Round up your answers to the second decimal. Explain how things changed compared to Part (2).
5. Now let y = 140 and the interest rate is r = 0.1. Determine the household's lifetime wealth, optimal current-period consumption, optimal future-period consumption, and optimal saving using the same assumption that household's preferences are such that it wants to have equal consumption in both periods. Round up your answers to the second decimal.Explain how things changed compared to Part (3)
6. Briefly explain (no more than two sentences) why how c, c′, and s changed after an increase in the real interest rate were different across Part (4) and Part (5).
|
Which strategy leads to each restaurant
: Which strategy leads to each restaurant receiving the maximum possible payoff, taking into account the other restaurant's strategy?
|
|
Do swot analysis about the given case.
: Do SWOT analysis about the given case.What possible gaps do you see in the company (think opportunities, weaknesses, threats) which haven't already been addressed? Perhaps these have to do with new regulations forthcoming in the industry which may ..
|
|
Describe a situation in the workplace related to motivation
: Describe a specific situation in the workplace related to motivation and job satisfaction from your own professional experience and apply one of the theories to the situation.
|
|
Flawed measure of progress within a country
: Several scholar have argued that GDP is a flawed measure of progress within a country. Explain some of the flaws with the measure of GDP and describe other measure that help overcome these flaws.
|
|
Determine the household lifetime wealth
: A household's income in the current period is y = 95, and income in the future period is y′ = 115. The household pays lump-sum taxes t = 15 in the current period and t′ = 10 in the future period. The real interest rate r is 0.05, or 5%, per perio..
|
|
How are you going to score the projects
: The method for applying the selection criteria, and the justification for both. How are you going to score the projects and evaluate the scores?
|
|
What technique was probably used to measure the f-state
: Diagram the folding of a soluble protein in the cell starting from the ribosome. At each step, cells produce other proteins that increase the efficiency of folding-calculate/Estimate the electrostatic contribution of this residues side chain to th..
|
|
Explain effective approache to the broad spectrum of employe
: Explain effective approaches to the broad spectrum of employee relations, including career development, fostering ethical behavior,discipline, labor relations, and dismissals.Use technology and information resources to research issues in human reso..
|
|
Stages to the event planning process
: As outlined in the textbook, there are five stages to the event planning process. Utilizing this five stage process, develop a faux special event to be held in a location of your choice.
|