What happens to your saving

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Suppose that you are currently a college senior. You are currently working a part-time job that pays $2,000 per year (call it Y1), but you expect to earn $20,000 next year (call it Y2), after you graduate. Assume that there is no inflation and that the interest rate is 10% per year. 

Set Y1 back to $2,000. Suppose that expected income (Y2) doubles to $40,000 per year. What happens to your current consumption? What happens to your saving?

Reference no: EM13903992

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