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

Traditional business cycle, casual factors of traditional business cycle an...

casual factors of traditional business cycle and its effects on the sectors of the economy

Country abandons its national currency, When a country abandons its nationa...

When a country abandons its national currency and adopts the currency of the United States, this is known as: A) A floating exchange rate system. B) Dollarization. C) A speculat

National income statistics, what is the use of national income statistics a...

what is the use of national income statistics as an indicator for a country''s standard of living?

Non-farming business sector, Determine the current productivity results for...

Determine the current productivity results for the non-farming business sector and the manufacturing sector. Discuss recent productivity and cost trends and make predictions for th

Paper mill and downstream box mill, Suppose that a paper mill "feeds " a d...

Suppose that a paper mill "feeds " a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit o

Overnight rates and interest rates with longer maturity, Q. Overnight rates...

Q. Overnight rates and interest rates with longer maturity? By controlling overnight interest rates, central bank will affect interest rates with longer maturity. Main reason f

Stocks and flows, Stocks and Flows   When studying economics, one must b...

Stocks and Flows   When studying economics, one must be sure whether the variable being studied is a stock variable or a flow variable. Failure to do so can cause faulty economi

Lm curve with inflation, The LM curve with inflation  We know that LM ...

The LM curve with inflation  We know that LM curve will shift upwards when P increases (presuming MS is constant). This is still true though we can also add that LM curve glid

How much money can banks create, How much money can banks create? Does...

How much money can banks create? Does this mean that banks can create an unlimited amount of money? The answer is no - that would require them to lend an unlimited amount of m

Find out the marginal utility-demand curve, 1.  What is law of diminishing ...

1.  What is law of diminishing marginal utility? 2.  Find out the marginal utility for the following schedule of consuming pizza Pizza consumed 0

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