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3. Consider the two period setup for the household . Suppose the government initially raises revenue...
1. Consider an economy that exists for 3 periods: period 1, period 2 and period 3....
1. Consider an economy that exists for 3 periods: period 1, period 2 and period 3. In each case the government must satisfy the budget constraint: Be+1 = (1 + i)B,+G -T; (a) Write this budget constraint for each period. (b) What must be true for B.? (c) Using the results from part (b), solve the period 3 budget constraint for B3 and substitute this back into the period 2 constraint. (d) Solve this new version of the period 2...
Ricardian equivalence and the government budget constraint: Consider the intertemporal budget constraint in equation (18.5). Assume...
Ricardian equivalence and the government budget constraint: Consider the intertemporal budget constraint in equation (18.5). Assume the interest rate is i 5% (a) Suppose the government cuts taxes today by $100 billion. Describe three possible ways the government can change spending and taxes to satisfy its budget constraint. (b) Suppose consumers obey the permanent-income hypothesis (discussed in Chapter 10). Would their consumption rise, fall, or stay the same for each of the alternatives considered in part (a)? (c) What happens...
Consider a household living for two periods
Consider a household living for two periods, t = 1, 2. Let ct and yt denote consumption and income in period t. s denotes saving in period 1, r is the real interest rate and β the weight the household places on future utility. The following must be true about the household’s consumption in the two periods:c1 = y1 − sandc2 = (1 + r)s + y2a. Derive the household’s intertemporal budget constraint.b. Assume that the preferences of the household can be represented by a log utility...
A two-period endowment economy as we studied in class has consumers with identical preferences and the...
A two-period endowment economy as we studied in class has consumers with identical preferences and the consumption good is non storable. Suppose that there is a benevolent government (i.e. a government that seeks to maximize the welfare of consumers) that imposes lump-sum taxes and make lump-sum transfers. (Recall, taxes can be negative, in which case they are called transfers.) The government must satisfy its present-value budget constraint T2 1+r where T, denotes taxes (T, >o) or transfers (T <0) in...
Hello can someone help me answer this question please Dr. Maria Candido Version A 3. (9...
Hello can someone help me answer this question please
Dr. Maria Candido Version A 3. (9 points) Consider an economy that exist for three periods. The intertemporal budget constraint for the three-period economy is given by: T2-G T-G T,-G1+ (1+i)B (1+i) (1+ where T is defined as net taxes, the difference between taxes and transfers, G are government purchases of goods and services, i is the interest rate, and B, is the stock of debt at the beginning of period...
Consider the two-period model from Chapter 9, and assume there is one representative consumer with utility...
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...
There is a consumer who lives for two periods. His income is given by Y1 and...
There is a consumer who lives for two periods. His income is given by Y1 and Y2. He has access to the credit market with the interest rate r. The government collects lump-sum taxes T1 and T2 (note that T1 and T2 might be negative meaning that the government makes a transfer). The government can run a surplus or a deficit, but must borrow (or save) in the credit market at the interest rate r. Assume that the government is...
There is a consumer who lives for two periods. His income is given by Y1 and...
There is a consumer who lives for two periods. His income is given by Y1 and Y2. He has access to the credit market with the interest rate r. The government collects lump-sum taxes T1 and T2 (note that T1 and T2 might be negative meaning that the government makes a transfer). The government can run a surplus or a deficit, but must borrow (or save) in the credit market at the interest rate r. Write down the government intertemporal...
Consider the following 2-period model U(C1,C2) = min{4C1,5C2} Ci + S = Y1-T C2 = Y2...
Consider the following 2-period model U(C1,C2) = min{4C1,5C2} Ci + S = Y1-T C2 = Y2 - T2 + (1+r)S Where C: first period consumption C2: second period consumption S: first period saving Y] = 20 : first period income Ti = 5 : first period lump-sum tax Y2 = 50 : second period income T2 = 10 : second period lump-sum tax r= 0.05 : real interest rate Find the optimal saving, S*
Consider a two-period economy discussed in Chapter 9. Suppose there are only two households, and each...
Consider a two-period economy discussed in Chapter 9. Suppose there are only two households, and each household's utility function and endowment are given as follows. u' (C1,C2) = (C122) and e' = (18,4). u? (C1,C2) = Incı + 2 Inc and e? = (3,6). el denote the allocation of endowment income for household i. For simplicity, there is no government, and therefore no tax in both periods. There is a perfectly competitive credit (financial market in which they can buy...
1. Consider an economy that exists for 3 periods: period 1, period 2 and period 3. In each case the government must satisfy the budget constraint: Be+1 = (1 + i)B,+G -T; (a) Write this budget constraint for each period. (b) What must be true for B.? (c) Using the results from part (b), solve the period 3 budget constraint for B3 and substitute this back into the period 2 constraint. (d) Solve this new version of the period 2...
Ricardian equivalence and the government budget constraint: Consider the intertemporal budget constraint in equation (18.5). Assume the interest rate is i 5% (a) Suppose the government cuts taxes today by $100 billion. Describe three possible ways the government can change spending and taxes to satisfy its budget constraint. (b) Suppose consumers obey the permanent-income hypothesis (discussed in Chapter 10). Would their consumption rise, fall, or stay the same for each of the alternatives considered in part (a)? (c) What happens...
A two-period endowment economy as we studied in class has consumers with identical preferences and the consumption good is non storable. Suppose that there is a benevolent government (i.e. a government that seeks to maximize the welfare of consumers) that imposes lump-sum taxes and make lump-sum transfers. (Recall, taxes can be negative, in which case they are called transfers.) The government must satisfy its present-value budget constraint T2 1+r where T, denotes taxes (T, >o) or transfers (T <0) in...
Hello can someone help me answer this question please
Dr. Maria Candido Version A 3. (9 points) Consider an economy that exist for three periods. The intertemporal budget constraint for the three-period economy is given by: T2-G T-G T,-G1+ (1+i)B (1+i) (1+ where T is defined as net taxes, the difference between taxes and transfers, G are government purchases of goods and services, i is the interest rate, and B, is the stock of debt at the beginning of period...
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...
Consider the following 2-period model U(C1,C2) = min{4C1,5C2} Ci + S = Y1-T C2 = Y2 - T2 + (1+r)S Where C: first period consumption C2: second period consumption S: first period saving Y] = 20 : first period income Ti = 5 : first period lump-sum tax Y2 = 50 : second period income T2 = 10 : second period lump-sum tax r= 0.05 : real interest rate Find the optimal saving, S*
Consider a two-period economy discussed in Chapter 9. Suppose there are only two households, and each household's utility function and endowment are given as follows. u' (C1,C2) = (C122) and e' = (18,4). u? (C1,C2) = Incı + 2 Inc and e? = (3,6). el denote the allocation of endowment income for household i. For simplicity, there is no government, and therefore no tax in both periods. There is a perfectly competitive credit (financial market in which they can buy...
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