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

Calculate rental price of capital, Let the real interest rate, i r , equal ...

Let the real interest rate, i r , equal 5 percent and the rate of depreciation, d, equal 10 percent.  In this case, if the price of a piece of capital is P K = $10,000, what is th

Explain the problem with IS-LM model, Q. Explain the problem with IS-LM mod...

Q. Explain the problem with IS-LM model? The starting point of AS-AD model is an assumption in IS-LM model (and in the cross model) that limits its usefulness. This is an assum

Telemarketer makes six phone calls, A telemarketer makes six phone calls pe...

A telemarketer makes six phone calls per hour and is able to make a sale on 30 percent of these contacts. During the next two hours, find: A) The probability of making exactly four

Investment strategy management, I am studying Investment Management. My ass...

I am studying Investment Management. My assignment is to develop my own Investment Strategy in the light of existing Macroeconomic environment situation for a country such as Pakis

Inflation, Social and Political Effects of Inflation in India and Other Cou...

Social and Political Effects of Inflation in India and Other Countries

What are the various uses for break-even analysis, Such analysis permits th...

Such analysis permits the firm to determine at what level of operations it will break even (earn zero profit) and to discover the relationship among volume, costs, and profits. It

Supply curve goes through the point, If a supply curve goes through the poi...

If a supply curve goes through the point P = $10 and Qs = 320, then a. $10 is the highest price that will induce firms to supply 320 units b. $10 is the lowest price that wil

Indicate the beginnings, Which of the following would indicate the beginnin...

Which of the following would indicate the beginnings of an expansion of the economy? a. Fewer new firms are started. b. Stock market prices decline c. Consumer confidence improves

What is price level, The price level is the monetary value of a good or ser...

The price level is the monetary value of a good or service.

Robert''s new way vacuum cleane, Robert's New Way Vacuum Cleaner Company is...

Robert's New Way Vacuum Cleaner Company is a newly started small business that produces vacuum cleaners and belongs to a monopolistically competitive market. Its demand curve for t

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