User Account

All Pages

The permanent-income theory of consumption

Assignment Help Microeconomics
Reference no: EM131634498

Question: The permanent-income theory of consumption: According to the permanenting come hypothesis, how does your consumption change in each of the following scenarios? (The first question is answered for you.) To keep things simple, suppose the interest rate is 10% and you will live forever. Feel free to give answers that involve approximations.

(a) A distant aunt that you never knew dies and leaves you $100,000 in her will. (Answer: Consumption rises today and in the future by a constant amount, equal to the "permanent-income equivalent" of the $100,000. Since you live forever, you can raise your consumption by the amount of interest earned on the bequest. So consumption rises in every period by 0.10 × $100,000 = $10,000.17)

(b) You receive an unexpected promotion today that raises your income permanently by $5,000 per year.

(c) To balance its budget, the government levies a onetime tax this year that costs you $10,000.

(d) You win a lottery, which pays you a onetime amount of $10 million today.

(e) You win a different lottery, which pays you a onetime amount of $10 million, but the payment is made 5 years from now.

Reference no: EM131634498

Questions Cloud

Should any one of these factors possess greater weight : Should any one of these factors possess greater weight? Should dismissal of charges continue to be the remedy for a violation of the right to a speedy trial?
Effect the resting membrane potential : How does K effect the resting membrane potential, and what effect would you see with an elevated level, and a low level.
Describe the typologies of groups that predominate : Conduct a Web search of American monitoring organizations, read their mission statements, and assess their services
Calculate the density of a solution : How would I find or calculate the density of a solution given that it is comprised of ethanol with a density of 0.789 g/mL and water with a density of 0.998 g/m
The permanent-income theory of consumption : The permanent-income theory of consumption: According to the permanenting come hypothesis, how does your consumption change in each of the following scenarios?
Define treatment of how the response team should deal : the plan is any treatment of how the response team should deal with the psychological challenges of dealing with significant loss of life
What are two of best practice for developing secure software : What are two of the best practice for developing secure software and system? Why would each practice be suitable for an organization to implement to strengthen?
Define resort to violence in various situations : Noting how this socialization increases the likelihood that they will resort to violence in various situations
Find and review several sample of fall protection programs : Find and review several sample of fall protection programs for construction companies, as well as visit osha gov for relevant fall protection requirements.

Reviews

Write a Review

Microeconomics Questions & Answers

  The free rider problem

Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

  Failure of the super committee is good thing for economy

Some commentators have argued that the failure of the “Super committee” is good thing for the economy?  Do you agree?

  Case study analysis about optimum resource allocation

Case study analysis about optimum resource allocation: -  Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

  Fixed cost and vairiable cost

Questions:  :   Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

  Problem - total cost, average cost, marginal cost

Problem - Total Cost, Average Cost, Marginal Cost: -  Complete the following table of costs for a firm.  (Note: enter the figures in the  MC   column  between  outputs of  0 and 1, 1 and 2, 2 and 3, etc.)

  Oligopoly and demand curve problem

Problem based on Oligopoly and demand curve,  Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?

  Impact of external costs on resource allocation

Explain the impact of external costs and external benefits on resource allocation;  Why are public goods not produced in sufficient quantities by private markets?  Which of the following are examples of public goods (or services)? Delete the incorrec..

  Shifts in demand and movements along the demand curve

Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..

  Article review question

Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

  Long-term growth, international trade & globalization

Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..

  European monetary union (emu) in crisis

"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"

  Development game “settlers of catan”

Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd