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

Liberalisation and changing sectoral composition of fdi, Liberalisation and...

Liberalisation and Changing Sectoral Composition of FDI: The latest is the ICT wave that has influenced the global shift in service industries the most. Therefore, these  flow

Aggregate production function, The aggregate production function Defin...

The aggregate production function Definition Imagine the national economy during a short period of time (say one week). We refer:  L: total amount of work used duri

Monetary policy., what are the model of money supply

what are the model of money supply

Definitions for GDPand GNP, Why is GNP C+ I + G + (X- M)+ NR + NP. What is...

Why is GNP C+ I + G + (X- M)+ NR + NP. What is relationship between X - M and NR + NP

Live around a hazardous waste dump, : Suppose that 100 people live around a...

: Suppose that 100 people live around a hazardous waste dump. If the people continue to live there for 20 years, one of them will likely contract a painful, non-fatal cancer that w

Inflation, Hello, how to cure inflation, particularly addressing rising foo...

Hello, how to cure inflation, particularly addressing rising food prices thanks Gedanken

Assignment, Can i have a guide on a particular macroeconomics assignment? I...

Can i have a guide on a particular macroeconomics assignment? I have totally no idea on how to start it. Please reply and i will show the question.

Critique the effectiveness of the model, Discuss how decisions are made in ...

Discuss how decisions are made in your workgroup. Which model is used for what situation? Be sure to provide specific examples of at least three situations and what model was used

Walrasion equilibrium.., # ?????? ..

# ?????? ..

Pros and cons of var, Since their inception, VAR models have been at the ce...

Since their inception, VAR models have been at the centre of many controversies associated with econometric modelling. The recurring criticism throughout history is due to the mode

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