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

Great depression, What was the classical models

What was the classical models

Increase in supply, Explain the adjustment to the new equilibrium price fro...

Explain the adjustment to the new equilibrium price from an increase in supply.

What is cost-push inflation, What is Cost-push inflation Cost-push infl...

What is Cost-push inflation Cost-push inflation takes place when costs of production increase causing short-run aggregate supply curve to shift to left. The main causes of c

Change in the dependent variable, All other things being held constant, wha...

All other things being held constant, what is the change in the dependent variable for a unit change in the first independent variable for the multiple regression equation: ? = 5.2

International trade, what does international trade fails to its claims ?

what does international trade fails to its claims ?

monetary account , link of monetary account with other sectors and its mea...

link of monetary account with other sectors and its meaning

Notion of the hidden momentum of population growth, Explain the notion of t...

Explain the notion of the hidden momentum of population growth. Why is this an important concept for projecting future population trends in different developing nations?

Major brokerage firm advised, Suppose a major brokerage firm advised its cl...

Suppose a major brokerage firm advised its clients to buy cigarette stocks under the assumption that, if consumer incomes rise by 50% as expected over the next decade, cigarette sa

Consumers become better educated about the products, How can consumers beco...

How can consumers become better educated about the products they are considering for purchase? To what extent do you personally go to acquire the best information available?

What is keynesian model, Q. What is Keynesian model? Keynesian model is...

Q. What is Keynesian model? Keynesian model is slightly more complicated than the classic model and it is developed in four stages by analysing four separate models. Every 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