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Question 1 (3 Points): Assume a consumer has current-period income y = 120, future-period income y'...
A consumer's income in the current period is y=100, and income in the future period is...
A consumer's income in the current period is y=100, and income in the future period is y' =120. He or she pays lump-sum taxes t =20 in the current period and t' =10 in the future period. The real interest rate is 0.1, or 10%, per period. Also assume that this consumer likes to consume the same amount of consumption each period, that is, c = c. Questions: a) [5 points] Calculate the lifetime wealth for this consumer. b) [4...
1. (12 points) Adapted from Williamson chapter 9 question 1. Jason's income in the current period...
1. (12 points) Adapted from Williamson chapter 9 question 1. Jason's income in the current period is y 2200, and income in the future period is U2-2000. The real interest rate is 4%. (a) (2 points) Suppose that current and future consumptions are perfect comple- ments for Jason His life time utility is given by minsc, c21. Draw Jason's indifference curves (b) (2 points) Jason's indifference curves are not the usually smooth curves. The marginal condition for Jason does not...
A consumer receives income y in the current period, income yœ in the future period, and...
A consumer receives income y in the current period, income yœ in the future period, and pays taxes of t and t œ in the current and future periods, respectively. The consumer can borrow and lend at the real interest rate r. This consumer faces a constraint on how much he or she can borrow, much like the credit limit typically placed on a credit card account. That is, the consumer cannot borrow more than x, where x < we...
A consumer receives income y in the current period, income yœ in the future period, and...
A consumer receives income y in the current period, income yœ in the future period, and pays taxes of t and t œ in the current and future periods, respectively. The consumer can borrow and lend at the real interest rate r. This consumer faces a constraint on how much he or she can borrow, much like the credit limit typically placed on a credit card account. That is, the consumer cannot borrow more than x, where x < we...
A consumer receives income y in the current period, income yœ in the future period, and pays taxes of t and t œ in the c...
A consumer receives income y in the current period, income yœ in the future period, and pays taxes of t and t œ in the current and future periods, respectively. The consumer can borrow and lend at the real interest rate r. This consumer faces a constraint on how much he or she can borrow, much like the credit limit typically placed on a credit card account. That is, the consumer cannot borrow more than x, where x < we...
2 Two Period Model of Consumption/Saving Decisions with Taxes (8 points) Assume a consumer who has...
2 Two Period Model of Consumption/Saving Decisions with Taxes (8 points) Assume a consumer who has current period income y200, future period income y-150, current taxes t = 40, and future taxes t' 50, and faces a market interest rate of r-5 percent or .05. The consumer would like to consume such that e'=e*(1+r) if possible. However, this consumer is faced with a credit market imperfection, in that no borrowing is allowed. That is s must be greater or equal...
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...
3 Consumption Taxes and Ricardian Equiv- alence (8 points) Suppose a consumer has income y in...
3 Consumption Taxes and Ricardian Equiv- alence (8 points) Suppose a consumer has income y in period 1, y' in period 2, and faces a proportional tax on consumption. That is if consumption is c in period 1 'and c' in period 2, the consumer pays a tax sc on period 1 consumption and s'c' ou period 2 consumption. Thuss and s' represent the rate of sales tax in each period. The government wishes to collect total tax revenue in...
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...
1 [75 points; Chapter 5] You are to solve the consumer choice problem for three different...
1 [75 points; Chapter 5] You are to solve the consumer choice problem for three different consumers. Each consumer has $150 to spend (income) and faces prices Px = $2 and Py = $3 for goods X and Y. Consumers I, II, and III have utility functions U'(X, Y) = X? + Y, U"(X, Y) = X12 + Yl2, and UTM(X, Y) = X´Y, respectively. For each consumer, do the following steps. a [15 points] Carefully express the consumer's choice...
A consumer's income in the current period is y=100, and income in the future period is y' =120. He or she pays lump-sum taxes t =20 in the current period and t' =10 in the future period. The real interest rate is 0.1, or 10%, per period. Also assume that this consumer likes to consume the same amount of consumption each period, that is, c = c. Questions: a) [5 points] Calculate the lifetime wealth for this consumer. b) [4...
1. (12 points) Adapted from Williamson chapter 9 question 1. Jason's income in the current period is y 2200, and income in the future period is U2-2000. The real interest rate is 4%. (a) (2 points) Suppose that current and future consumptions are perfect comple- ments for Jason His life time utility is given by minsc, c21. Draw Jason's indifference curves (b) (2 points) Jason's indifference curves are not the usually smooth curves. The marginal condition for Jason does not...
2 Two Period Model of Consumption/Saving Decisions with Taxes (8 points) Assume a consumer who has current period income y200, future period income y-150, current taxes t = 40, and future taxes t' 50, and faces a market interest rate of r-5 percent or .05. The consumer would like to consume such that e'=e*(1+r) if possible. However, this consumer is faced with a credit market imperfection, in that no borrowing is allowed. That is s must be greater or equal...
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...
3 Consumption Taxes and Ricardian Equiv- alence (8 points) Suppose a consumer has income y in period 1, y' in period 2, and faces a proportional tax on consumption. That is if consumption is c in period 1 'and c' in period 2, the consumer pays a tax sc on period 1 consumption and s'c' ou period 2 consumption. Thuss and s' represent the rate of sales tax in each period. The government wishes to collect total tax revenue in...
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...
1 [75 points; Chapter 5] You are to solve the consumer choice problem for three different consumers. Each consumer has $150 to spend (income) and faces prices Px = $2 and Py = $3 for goods X and Y. Consumers I, II, and III have utility functions U'(X, Y) = X? + Y, U"(X, Y) = X12 + Yl2, and UTM(X, Y) = X´Y, respectively. For each consumer, do the following steps. a [15 points] Carefully express the consumer's choice...
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