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

Eco, illustrate and discuss the implications of various market structures (...

illustrate and discuss the implications of various market structures (competitive and non-competitive)for price determination.

Give example to calculate the price level, Give example to calculate the pr...

Give example to calculate the price level Imagine that we have created a particular basket of services and goods. We calculate price level at four different points in time duri

Outline two main restrictions by indian government applied t, outline two m...

outline two main restrictions by indian government applied to import. Using the data from your case study analyse and explain who would benefit directly and who would lose directly

Keynesian economics of consumption, Effects of consumption function.

Effects of consumption function.

#.., what are the purposes of taxation

what are the purposes of taxation

First investment yields a gain, An investor has a choice of 2 investment op...

An investor has a choice of 2 investment opportunities. The first investment yields a gain of $2800 with probability of 0.37, a gain of $1100 with probability of 0.27, and otherwis

Gdp, The following is the information from the national income accounts for...

The following is the information from the national income accounts for a hypothetical country: GDP Rs. 6000.00 Gross Investment Rs. 800.00 Net Investment Rs. 200.00 Consumption Rs.

Mundell Fleming model, explain the model

explain the model

Budget, what are the function of budget

what are the function of budget

Classical economic theory, Between 2007 and 2009 the U.S. economy experienc...

Between 2007 and 2009 the U.S. economy experienced a severe recession. In an effort to stimulate the economy, the federal government passed a stimulus package. Explain the federal

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