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Question 2: The consumption function with taxes that change over time To...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by 1-1 1-1 with μ > 0 where c1 and c2 are consumption in period 1 and period 2 respectively (Portfolio Choice Problem) Now suppose that the consumer can save in terms of two instruments: financial savings (s) and capital investment (k). Capital investment done in period 1 yields output ka with 0 < α < 1 in period 2....
1. Consider the following two period consumption savings problem. A consumer cares about consumption (c and...
1. Consider the following two period consumption savings problem. A consumer cares about consumption (c and future consumption c according to Assume that U(c) is given by for some constant y. In the present the consumer chooses how much to consume and how much to save out of her income y>0 This decision is made in the knowledge that in the future she will be retired, have no income, and thus future consumption will be entirely out of savings: c)a,...
Question 1. Suppose Kala's utility function is a function of consumption, with U = 150 cm...
Question 1. Suppose Kala's utility function is a function of consumption, with U = 150 cm Her income is 6. What is the expected value of a gamble where she wins 4 with probability 75% and loses 4 with probability 25%? Would Kala take this gamble? Question 2. What is the present value of $100 in two years, if the yearly interest rate is 7%? Question 3. Laura is deciding how much to consume in periods o, 1, and 2....
Please give a detailed solution, thank you! 4. Two consumers (call them A and B) have utility functions over consumption...
Please give a detailed
solution, thank you!
4. Two consumers (call them A and B) have utility functions over consumption in period 1 and consumption in period 2 given by U (1,C2)n(c)ln(c2) In period 1, consumer A receives income of y 2, the endowments are reversed, consumer A gets y= 120 and consumer B gets y = 80 80 and consumer B receives y? = 120. In period (so they just a. First assume consumers are not allowed to save...
2. Suppose the government announces that it will reduce taxes for one year with no change in government spending. D...
2. Suppose the government announces that it will reduce taxes for one year with no change in government spending. Describe the effect of the temporary tax cut on output (Y), consumption (C), investment (I), and net exports (X) for each of the following assumptions about household consumption behavior. Explain your answers. a. Household follow the simple Keynesian consumption function. b. Households are forward-looking but do not anticipate a future tax hike which would completely offset the current tax reduction. c....
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...
2.Consider the inter-temporal model of consumption studied in class, with two possible periods. A...
2.Consider the inter-temporal model of consumption studied in class, with two possible periods. Assume that initially that an individual is a saver. If the interest rate rises, which statement is false? a. The individual will never become a borrower. b.The individual will necessarily increase their savings. c.The individual must remain a saver d. The individual could increase or decrease their savings, but she must remain a saver. 4. Consider the inter-temporal model of consumption studied in class, with two possible...
05 Suppose that Mingsong's utility function for inter-temporal co is: U(CO,C1) In(C0) n(C1)/(1 +p)] where CO...
05 Suppose that Mingsong's utility function for inter-temporal co is: U(CO,C1) In(C0) n(C1)/(1 +p)] where CO is his current period consumption, CI is his future period consumption and ρ is his subject rate of time preference. Let ρ be 5%. If Mingsong is endowed with $100 this period and $100 in the next period. And suppose the risk-free interest rate is 10%. What is Mingsong's optimal consumption path (i.e., the optimal level of current and future consumption) if he can...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by 1-1 1-1 with μ > 0 where c1 and c2 are consumption in period 1 and period 2 respectively (Portfolio Choice Problem) Now suppose that the consumer can save in terms of two instruments: financial savings (s) and capital investment (k). Capital investment done in period 1 yields output ka with 0 < α < 1 in period 2....
1. Consider the following two period consumption savings problem. A consumer cares about consumption (c and future consumption c according to Assume that U(c) is given by for some constant y. In the present the consumer chooses how much to consume and how much to save out of her income y>0 This decision is made in the knowledge that in the future she will be retired, have no income, and thus future consumption will be entirely out of savings: c)a,...
Question 1. Suppose Kala's utility function is a function of consumption, with U = 150 cm Her income is 6. What is the expected value of a gamble where she wins 4 with probability 75% and loses 4 with probability 25%? Would Kala take this gamble? Question 2. What is the present value of $100 in two years, if the yearly interest rate is 7%? Question 3. Laura is deciding how much to consume in periods o, 1, and 2....
Please give a detailed
solution, thank you!
4. Two consumers (call them A and B) have utility functions over consumption in period 1 and consumption in period 2 given by U (1,C2)n(c)ln(c2) In period 1, consumer A receives income of y 2, the endowments are reversed, consumer A gets y= 120 and consumer B gets y = 80 80 and consumer B receives y? = 120. In period (so they just a. First assume consumers are not allowed to save...
2. Suppose the government announces that it will reduce taxes for one year with no change in government spending. Describe the effect of the temporary tax cut on output (Y), consumption (C), investment (I), and net exports (X) for each of the following assumptions about household consumption behavior. Explain your answers. a. Household follow the simple Keynesian consumption function. b. Households are forward-looking but do not anticipate a future tax hike which would completely offset the current tax reduction. c....
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...
05 Suppose that Mingsong's utility function for inter-temporal co is: U(CO,C1) In(C0) n(C1)/(1 +p)] where CO is his current period consumption, CI is his future period consumption and ρ is his subject rate of time preference. Let ρ be 5%. If Mingsong is endowed with $100 this period and $100 in the next period. And suppose the risk-free interest rate is 10%. What is Mingsong's optimal consumption path (i.e., the optimal level of current and future consumption) if he can...
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