Homework Answers
Answer 1= -(1+r)
Reason- If the consumer forgoes consumption by $1 in first period, the consumption in second period rises by $(1+r). Hence, -(1+r) is the slope of intertemporal budget constraint.
Answer 2= Made in between two periods of time.
Reason- Intertemporal decisions are made between two periods of time usually known as first period and second period , today and future etc.
Answer 3= an increase in first period consumption, an increase in second period consumption, and an decrease in savings.
Reason- When second period income rises, consumer can consume more in second period without increasing the savings. This leads to increased consumption in first period as well.
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Question 1 (1 point) If we represents a two-period consumer's lifetime wealth and r denotes the...
Question 8 (1 point) If we represents a two-period consumer's lifetime wealth and r denotes the...
Question 8 (1 point) If we represents a two-period consumer's lifetime wealth and r denotes the real rate of interest, the vertical (future consumption) intercept of the consumer's budget line is equal to Owe. (1+r)/we O-(1 + r)c + we(1+r). we(1 + r). Owe/(1+r) Question 9 (1 point) A consumer is a borrower if the consumer's indifference curves are relatively steep. O optimum current consumption is less than current disposable income. O optimum current consumption is greater than current disposable...
1. If we=1,000 represents a two-period consumer's lifetime wealth and r=0.05 denotes the real rate of...
1. If we=1,000 represents a two-period consumer's lifetime wealth and r=0.05 denotes the real rate of interest, the slope of the consumer's budget line is equal to Question 12 options: a. -1.05 b. 50.05 c. -0.95 d. -0.00005 e. 50 2. Suppose that the utility function of the consumer is U(c,c’)=ln(c) + b ln( c’ ) . Analyze the solution of the model to show show that optimal consumption increases over time when Question 3 options: a. b > 1...
can anyone help me with this question? 2. An review of intertemporal optimization: Suppose a consumer's utility function is given by U(c,2) where ci is consumption in period 1 and ca is consum...
can
anyone help me with this question?
2. An review of intertemporal optimization: Suppose a consumer's utility function is given by U(c,2) where ci is consumption in period 1 and ca is consumption in perio You can assume that the price of consumption does not change between periods 1 and 2. The consumer has $100 at the beginning of period 1 and uses this money to fund consumption across the two periods (i.e. the consumer does not gain additional income...
Question 1 (3 Points): Assume a consumer has current-period income y = 120, future-period income y'...
Question 1 (3 Points): Assume a consumer has current-period income y = 120, future-period income y' = 140, current and future taxes t = 20 and t' = 10, respectively, and faces a market real interest rate of r = 0.08, or 8% per period. The consumer has the following preferences over current and future consumption: U(c, c') = min(4c, 3c'). a) (1 points) Determine the consumer's lifetime wealth. b) (2 points) Determine what the consumer's optimal current-period and future-period...
Question 4. Laura is deciding how much to consume in periods o, 1 and 2. Suppose Laura income in period o is o, her...
Question 4. Laura is deciding how much to consume in periods o, 1 and 2. Suppose Laura income in period o is o, her income in period is y, and her income in period alsay. The price of consumption in period / is p. Assuming the interest rate is T, and consumption in period is denoted. In the utility maximization problem what variables are endogenous and which are exogenous ? Figure 1. Consider the following diagram of an indifference curve...
Problem 1.Consider a consumer who lives for two periods. His income in period 1 equals 2000...
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...
Question 1 (1 point) (1 Point) We assume that the representative consumer's preferences exhibit the properties...
Question 1 (1 point) (1 Point) We assume that the representative consumer's preferences exhibit the properties that Oa) they evolve over time and that more is always preferred to less. Ob) more is sometimes preferred to less and that consumption and leisure are both normal goods c) more is preferred to less and that the consumer prefers diversity d) the consumer likes diversity and that more is sometimes preferred to less. Question 2 (1 point) (1 Point) A good is...
3. A consumer lives for two periods. His income in period 1 is Y, and his...
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...
1. In the two-period small open (endowment) economy model reviewed in Chapter 3 of the textbook,...
1. In the two-period small open (endowment) economy model reviewed in Chapter 3 of the textbook, when a consumer chooses to allocate all of its lifetime wealth to consumption in period 2 and if Bo=0 then her C2 must be equal to: (a) Q2 + (b) Q2 + 14, (c) Q:(1+r)+22 (d) Q2(1 + r) + Q1 (e) 9+02 2. When the world interest rate rises then the income effect leads to a(n): (a) decrease in consumption in period 1...
Consider our intertemporal model, except this time we have three periods, wheret 0 is the first p...
Consider our intertemporal model, except this time we have three periods, wheret 0 is the first period, t = 1 is the second period, and t = 2 is the third and last period. This economy is populated by a representative agent and a government. The consumer seeks to maximize lifetime utility given by u(c) - an amount of gt = 0.2%, yt = 10 Vt. BIn(c). The government aims to spend t-0 Write down the individual's budget constraint. (0.5...
Question 8 (1 point) If we represents a two-period consumer's lifetime wealth and r denotes the real rate of interest, the vertical (future consumption) intercept of the consumer's budget line is equal to Owe. (1+r)/we O-(1 + r)c + we(1+r). we(1 + r). Owe/(1+r) Question 9 (1 point) A consumer is a borrower if the consumer's indifference curves are relatively steep. O optimum current consumption is less than current disposable income. O optimum current consumption is greater than current disposable...
can
anyone help me with this question?
2. An review of intertemporal optimization: Suppose a consumer's utility function is given by U(c,2) where ci is consumption in period 1 and ca is consumption in perio You can assume that the price of consumption does not change between periods 1 and 2. The consumer has $100 at the beginning of period 1 and uses this money to fund consumption across the two periods (i.e. the consumer does not gain additional income...
Question 1 (3 Points): Assume a consumer has current-period income y = 120, future-period income y' = 140, current and future taxes t = 20 and t' = 10, respectively, and faces a market real interest rate of r = 0.08, or 8% per period. The consumer has the following preferences over current and future consumption: U(c, c') = min(4c, 3c'). a) (1 points) Determine the consumer's lifetime wealth. b) (2 points) Determine what the consumer's optimal current-period and future-period...
Question 4. Laura is deciding how much to consume in periods o, 1 and 2. Suppose Laura income in period o is o, her income in period is y, and her income in period alsay. The price of consumption in period / is p. Assuming the interest rate is T, and consumption in period is denoted. In the utility maximization problem what variables are endogenous and which are exogenous ? Figure 1. Consider the following diagram of an indifference curve...
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...
Question 1 (1 point) (1 Point) We assume that the representative consumer's preferences exhibit the properties that Oa) they evolve over time and that more is always preferred to less. Ob) more is sometimes preferred to less and that consumption and leisure are both normal goods c) more is preferred to less and that the consumer prefers diversity d) the consumer likes diversity and that more is sometimes preferred to less. Question 2 (1 point) (1 Point) A good is...
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...
1. In the two-period small open (endowment) economy model reviewed in Chapter 3 of the textbook, when a consumer chooses to allocate all of its lifetime wealth to consumption in period 2 and if Bo=0 then her C2 must be equal to: (a) Q2 + (b) Q2 + 14, (c) Q:(1+r)+22 (d) Q2(1 + r) + Q1 (e) 9+02 2. When the world interest rate rises then the income effect leads to a(n): (a) decrease in consumption in period 1...
Consider our intertemporal model, except this time we have three periods, wheret 0 is the first period, t = 1 is the second period, and t = 2 is the third and last period. This economy is populated by a representative agent and a government. The consumer seeks to maximize lifetime utility given by u(c) - an amount of gt = 0.2%, yt = 10 Vt. BIn(c). The government aims to spend t-0 Write down the individual's budget constraint. (0.5...
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