a) Consumption in each period = 1650/3 = 550
savings in learning period = 50-550 = -500
Savings in working period = 1200-550 = 650
Savings in retirement period = 300-550 = -250
A consumer lives three periods, called the learning period, the working period, and the retirement period....
6. Consider a consumer that lives for two periods and chooses consumption in period 1 and in period 2. At the current interest rate of 10% the consumer borrows $10,000. If the interest rate increases to 30% what will happen to saving in period 1? (a) Saving in period 1 increases unambiguously. (b) Saving in period 1 decreases unambiguously. (c) Saving in period 1 does not change. (d) Saving in period 1 could either increase or decrease (uncertain)
Consider a consumer who lives for two periods. The consumer gets utility from consumption in each period. The consumer also gets an endowment of time in each period, L hours, which the consumer can use to work or consume as leisure . The consumer gets NO utility from leisure, however. There is no borrowing or lending. (a)(10%) Let w1 and w2 be the wage rates per hour in periods 1 and periods 2 respect- ively. In period 1, the consumer...
Problem 1.Consider a consumer who lives for two periods. His income in period 1 equals 2000 EUR and his income in period 2 equals 2500, Real interest rate equals 10% a) Use the appropriate diagram to show the consumer's intertemporal budget constraint and his consumption choice, assuming that he is a net lender in period 1 b) How will his consumption decision be affected if the interest rate increases to 20% Answr using the graph from part (a)? Will he...
Consider a consumer that lives only for two periods. He works in period 1 (and gets income Y1) and retires in period 2 (and gets income Y2 < Y1). This consumer has the usual preferences over time: u(C1) + βu(C2) Assume that now the consumer is allowed to save or borrow. Write down the new budget constraint. What is the consumption in period 1 and period 2? Display graphically. Could the consumer be worse of? Could the consumer be better...
3. A consumer lives for two periods. His income in period 1 is Y, and his income in period 2 is Y.,. The consumer is free to lend and borrow at zero interest rate (r=0 and R=1+r=1). Y, = Y, = 10. (a) What is the price of consumption in period 1 in terms of consumption in period 2? (How many units of period 2 consumption must the consumer give up to get an additional unit of consumption in period...
Problem 1. (Consumption smoothing) A consumer who lives for four periods have the following path of income y 60 0 60 0 Assume the consumer has log utility, a ct) 0 so that the real rate of return is 1 Inq, and is infinitely patient, β-1. Also aKsune the interest rate is (a) What is the optimal consumption profile of the consumer? (b) What is the value of assets, a, of the consumer at the beginning of period 47 (c)...
(30 marks) Jane lives for two periods. In the first period of her life she earns income Y1. The value of Y1 was determined by your student number. In the second period of her life, Jane is retired and does not earn any income. Jane’s decision is how much of her period one income should she save (S) in order to consume in period two. For every dollar that Jane saves in period one she has (1 + r) dollars...
) Jane lives for two periods. In the first period of her life she earns income Y1. The value of Y1 was determined by your student number. In the second period of her life, Jane is retired and does not earn any income. Jane’s decision is how much of her period one income should she save (S) in order to consume in period two. For every dollar that Jane saves in period one she has (1 + r) dollars available...
Consider the two-period model from Chapter 9, and assume there is one representative consumer with utility function uc,d) = Iníc) + In(d), so the time discount factor is 3 = 1. There is also a government that levies lump-sum taxes in the current and future periods. The government has expenditures of G = 580 in the current period and G' = 630 in the future period. (a) Suppose the consumer has current and future income (w.y') = (3500, 6510), and...
Jane lives for two periods. In the first period of her life she earns income Y1. The value of Y1 was determined by your student number. In the second period of her life, Jane is retired and does not earn any income. Jane’s decision is how much of her period one income should she save (S) in order to consume in period two. For every dollar that Jane saves in period one she has (1 + r) dollars available to...