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

Production possibilities, you and your neighbor (n) consume without trading...

you and your neighbor (n) consume without trading. suppose you are initially consuming 7 bananas and 3 coconuts and your neighbor is initially consuming 6 bananas and8 coconuts. Yo

Firm wants to sell goods, If a firm wants to sell goods more often, would t...

If a firm wants to sell goods more often, would they prefer to produce a high quality good that will not wear out or one that will wear out faster. For example, what is the 'life e

Important for policymakers, Why is it important for policymakers to conside...

Why is it important for policymakers to consider both the direct and indirect effects of public policies?

National icome determination, subjective questions on national income deter...

subjective questions on national income determination

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

Output-maximizing model, For a single nonprofit provider, describe an outpu...

For a single nonprofit provider, describe an output-maximizing model to predict supplier behavior.

Find the optimal amounts and solve the dual problem, After some consultants...

After some consultants point out that the Acme Toy Company has two bottlenecks in its production of xylophones and yo-yos. The first is a critical grinding machine that only has 9

ECON 2203: Introduction to Macroeconomics Fall 2012, It is online assigneme...

It is online assignement, Can u do it?

Review of related economic theory, Oil price shocks lead to large adverse s...

Oil price shocks lead to large adverse supply shocks in the macroeconomy, infer Dornbusch et al (2008) who define an adverse supply shock as; ‘one that shifts the aggregate supply

Crowding out would most likely occur, Crowding out would most likely occur ...

Crowding out would most likely occur when: A. the Congress enacts budget cuts to balance the budget. B. workers lose jobs as a result of anti-inflationary fiscal policies. C. the f

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