What is permanent income-marginal propensity to consume

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Reference no: EM13833254

Sandy is planning her consumption over five periods during which she expects her income to be 4, 10, 16, 12 and 8.

(i) What is Sandy's permanent income?

(ii) What is Sandy's marginal propensity to consume out of a temporary increase that boosts first period income to 6?

(iii) What is the marginal propensity to consume if the income increase of 2 is expected to continue into the second period?

(iv) What is the marginal propensity to consume if the income increase of 2 is expected to continue for every period of Sandy's life?

Reference no: EM13833254

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