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

Analysis, provide data and analysis for the real GDP (as total and per capi...

provide data and analysis for the real GDP (as total and per capita) and its growth rate then draw a graph and identify the periods of the Malaysia’s business cycle 2007 -2011

Money demand function, Assume that the money demand function is (M/P) d = 2...

Assume that the money demand function is (M/P) d = 2,200 - 200r, where r is the interest rate in percent. The money supply M is 2,000 and the price level P is2. If the price level

Monetary policy, Let us now see a bit more closely how monetary policy work...

Let us now see a bit more closely how monetary policy works. See Figure Figure  The initial equilibrium at point E is on the initial LM schedule that corresponds to a

Measure to control inflation, .measure to control inflation

.measure to control inflation

The government - rest of the world and the financial markets, The Governmen...

The Government, Rest of the World and the financial markets total expenditure of government can be divided into two parts: transfers to private sector and consumption.

Monetary base and the supply of money, Q. Monetary base and the supply of m...

Q. Monetary base and the supply of money? It isn't possible for central bank to print and distribute money -which would increase their debt without increasing their assets. Rat

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

Modeling an economy using the solow model., Suppose we're modeling an econo...

Suppose we're modeling an economy using the Solow model. It begins in steady state. By what proportion does y? (the post-change steady-state per capita GDP) change in response to t

Multiplier, multiplier static and dynamic

multiplier static and dynamic

Money and credit, MONEY AND CREDIT  In any modern economy, the quantity...

MONEY AND CREDIT  In any modern economy, the quantity of money, aggregate volume of credit and its sectoral composition are important variables which exert significant influenc

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