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:
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a. -1.05 |
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b. 50.05 |
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c. -0.95 |
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d. -0.00005 |
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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:
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a. b > 1 |
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b. b (1+r)<1 |
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c. b (1+r)<0 |
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d. b (1+r)=1 |
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e. b (1+r)>1 |
Homework Answers
Q1) option a)
the Slope of intertemporal budget constraint = -(1+r)
= -1.05
Q2) option e)
at eqm in intertemporal utility maximization problem
MRS = (1+r)
MRS = MUc/MUc`
= C`/bC
So , C`/bC = (1+r)
C`/C = b(1+r)
So Consumption will increase over time if
C`>C
C`/C > 1
So, b(1+r) > 1
Add Answer to:
1. If we=1,000 represents a two-period consumer's lifetime
wealth and r=0.05 denotes the real rate of...
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where r is the real interest rate and we is the total wealth as defined in class. How does this individual maximise lifetime utlity? What are the implications of e Problem 3. Two-period Model Suppose the housechold chooses consumption c and d' to maximise the following Cobb-Douglas utility - n function subject to the following budget constraint IHr Solve analytically for the optimal consumptions c and ic' as a function of we, r and a....
can
anyone help me with this question?
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