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48)Assume you live 2 periods. You are born with nothing and plan to die with nothing Your before ...
2. A consumer is making lifecycle consumption plans for two periods (this year and next year)....
2. A consumer is making lifecycle consumption plans for two periods (this year and next year). The consumer's current real income after taxes is $100,000. She knows that her real income after taxes will be $121,000 in next year. She can borrow and lend freely at an annual real interest rate of 10%. Currently, the consumer has no wealth (no money in the bank or other financial assets, and no debts). A) If the consumer wants to consume the same...
2 A consumer is making lifecycle consumption plans for two periods (this year and next year....
2 A consumer is making lifecycle consumption plans for two periods (this year and next year. The consumer's current income after taxes is $100,000. She knows that her real income after taxes will be $121,000 in next year. She can borrow and lend freely at an annual real interest rate of 10%. Currently, the consumer has no wealth (no money in the bank or other financial assets, and no debts). A) If the consumer wants to consume the same amount...
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...
At your age (assume 20) you can assume that you will live to be 100. If...
At your age (assume 20) you can assume that you will live to be 100. If you graduate at 23 and start to work, you can expect to work for 47 years, until age 70. At that time you will be eligible for full Social Security benefits, which can reasonably be expected to be $3,000 per month, and which will be received monthly for the rest of your life. You can reasonably expect that your retirement savings will earn an...
Data on before-tax income, taxes paid, and consumption spending for the Simpson family in various years...
Data on before-tax income, taxes paid, and consumption spending for the Simpson family in various years are given below. Consu ption spending ($ 3,000 20, 000 3,500 21,350 3,700 22,07e 23,608 Before-tax income ($) Taxes paid ($) 25, 000 27,000 28,000 30,000 4,000 a. Graph the Simpsons' consumption function, then find their household's marginal propensity to consume and the intercept of the consumption function. Instructions: On the graph below, use the line tool provided. Click and drag your mouse to...
2) Is this household a borrower or a saver in period 1? Why? 3) Suppose government institues a 25% wage tax Calc...
2) Is this household a borrower or a saver in period 1?
Why?
3) Suppose government institues a 25% wage tax
Calculate the new consumption and savings decisions for this
household after the tax.
4) Given the demographics of this economy, how much tax
revenue was generated by the tax?
2 Life Cycle Consumption and Taxes (39 points) Assume we are in an economy of three period households that are born with $1500 in assets, leave no bequests, and behave...
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...
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...
Prepare your retirement plan as followed: A) Time periods: Estimate how long you have to save...
Prepare your retirement plan as followed: A) Time periods: Estimate how long you have to save and how long you will live after stop working by stating how old you are now ( I am 24) , when you will retire( 60) , and how long you will live(80). (e.g. you are 35 years old, plan to retire at the age of 60 and expected to live until 80, which suggests 25 years of saving period and 20 years of...
5. You’ve just graduated college, and you are contemplating your lifetime budget. You think your general pre-retirement living expenses will average around $60,000 a year. For the next 8 years, you will rent an apartment for $16,000 a year (assume end-of-
You’ve just graduated college, and you are contemplating your lifetime budget. You think your general pre-retirement living expenses will average around $60,000 a year. For the next 8 years, you will rent an apartment for $16,000 a year (assume end-of-period payments). At the end of Year 8, you will want to buy a house that should cost around $250,000. In addition, you will need to buy a new car roughly once every 10 years, starting now and continuing for the...
2. A consumer is making lifecycle consumption plans for two periods (this year and next year). The consumer's current real income after taxes is $100,000. She knows that her real income after taxes will be $121,000 in next year. She can borrow and lend freely at an annual real interest rate of 10%. Currently, the consumer has no wealth (no money in the bank or other financial assets, and no debts). A) If the consumer wants to consume the same...
2 A consumer is making lifecycle consumption plans for two periods (this year and next year. The consumer's current income after taxes is $100,000. She knows that her real income after taxes will be $121,000 in next year. She can borrow and lend freely at an annual real interest rate of 10%. Currently, the consumer has no wealth (no money in the bank or other financial assets, and no debts). A) If the consumer wants to consume the same amount...
A consumer's income in the current period is y=100, and income in the future period is y' =120. He or she pays lump-sum taxes t =20 in the current period and t' =10 in the future period. The real interest rate is 0.1, or 10%, per period. Also assume that this consumer likes to consume the same amount of consumption each period, that is, c = c. Questions: a) [5 points] Calculate the lifetime wealth for this consumer. b) [4...
Data on before-tax income, taxes paid, and consumption spending for the Simpson family in various years are given below. Consu ption spending ($ 3,000 20, 000 3,500 21,350 3,700 22,07e 23,608 Before-tax income ($) Taxes paid ($) 25, 000 27,000 28,000 30,000 4,000 a. Graph the Simpsons' consumption function, then find their household's marginal propensity to consume and the intercept of the consumption function. Instructions: On the graph below, use the line tool provided. Click and drag your mouse to...
2) Is this household a borrower or a saver in period 1?
Why?
3) Suppose government institues a 25% wage tax
Calculate the new consumption and savings decisions for this
household after the tax.
4) Given the demographics of this economy, how much tax
revenue was generated by the tax?
2 Life Cycle Consumption and Taxes (39 points) Assume we are in an economy of three period households that are born with $1500 in assets, leave no bequests, and behave...
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...
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...
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