User Account

All Pages

consumption , Macroeconomics

Assignment Help:
. (40 points) Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different income streams. Person A’s current income, yA, = 100, and future income, yfA, = 121. Person B’s current income, yB, is 120, and future income, yfB, = is 99. The real interest rate is 10%.

(a). Calculate the present value of lifetime resources (PVLR) for consumer A and consumer B, respectively.
(b). Draw consumer A’s budget constraint. How does the budget constraint of consumer A compare to the budget constraint of consumer B? Explain.
(c). Find consumer A’s optimal lifetime consumption plan, (cA, cfA). How does consumer B’s optimal lifetime consumption plan, (cB, cfB), compare to consumer A’s lifetime consumption plan? Explain.
(d). Is consumer A a current saver or a current borrower? Explain. Is consumer B a current saver or a current borrower? Explain.
(e). Draw a graph that illustrates how an increase in the interest rate (above 0.10) will affect the budget constraints of consumer A and consumer B. How does the budget constraint of consumer A compare to the budget constraint of consumer B?

Related Discussions:- consumption

Solow model in large open economies, In a large open economy, if the econom...

In a large open economy, if the economy has a fiscal expansion, what would happen in the solow model?

The income tax rate is reduced, If income falls below its potential and the...

If income falls below its potential and the income tax rate is reduced, this will: A. raise the passive deficit but reduce the structural deficit. B. raise both the passive and str

Diminishing scale output, what is meant by diminishing scale output

what is meant by diminishing scale output

World trade organization is a successor organization, The World Trade Organ...

The World Trade Organization is a successor organization to the A.United Nations. B.World Bank. C.International Court of Justice. D. GATT.

Industrial production and agricultural production, Industrial Production an...

Industrial Production and Agricultural Production  Industrial production and agricultural production are aggregate measures of sectoral outputs. It is a common practice to divi

Reserves and a reserve requirement, If the Banking system has $500,000 in d...

If the Banking system has $500,000 in demand deposit liabilities, $125,000 in total reserves and a reserve requirement of 15%: What is the maximum amount by which the money supply

International trade, How can a country maintain equilibrium GDP with foreig...

How can a country maintain equilibrium GDP with foreign trade?

What is the meaning of capital - Gross domestic product, What is the meanin...

What is the meaning of Capital - Gross domestic product By capital we characteristically mean manufactured goods which are used to produce other goods and services though are

What is the remaining wip for wc, Below is a simple/familiar (I hope) works...

Below is a simple/familiar (I hope) worksheet for the "Dice Game".  Answer the following questions given the data for the each Work Center's scheduled production:

Permanent income, assuming that B=0.33 Y1998=[0.33]Y1998 Estimate the perma...

assuming that B=0.33 Y1998=[0.33]Y1998 Estimate the permanent income for 1998

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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