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...
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 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 his income in two periods, can save or borrow, and views a unit of consumption in period 1 as a perfect complement (one for one) for a unit of consumption in period 2. If the real interest rate is positive, the consumer will: a. Consume only in period 1. b. Consume only in period 2. c. Consume equal amounts in each period. d. Consume more in period 1 than in period 2 if income elasticity exceeds...
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...
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,...
. A consumer receives his income in two periods, can save or borrow, and views a unit of consumption in period 1 as a perfect substitute (one for one) for a unit of consumption in period 2. If the nominal interest rate is 5% and the inflation rate is 6%, the consumer will: a. Consume only in period 1. b. Consume only in period 2. c. Consume equal amounts in each period. d. Consume more in period 1 than in...
A consumer receives his income in two periods, can save or borrow, and views a unit of consumption in period 1 as a perfect substitute (one for one) for a unit of consumption in period 2. If the nominal interest rate is 5% and the inflation rate is 6%, the consumer will: a. Consume only in period 1. b. Consume only in period 2. c. Consume equal amounts in each period. d. Consume more in period 1 than in period...
Starting with the dynamic consumption model seen in class, consider the case where the consumer is not facing lump-sum taxes, but proportional taxes. The tax is a linear tax on consumption. In first period, the consumer pays a tax t:c, in the second period T'.d. Note that t and t' need not be identical. The government wants to collect a total amount of revenue, which has a present value of R=G+ Now the government reduces t and increases t' in...
3. A consumer lives for two periods. His income in period 1 is Y, and his income in period 2 is Y.,. The consumer is free to lend and borrow at zero interest rate (r=0 and R=1+r=1). Y, = Y, = 10. (a) What is the price of consumption in period 1 in terms of consumption in period 2? (How many units of period 2 consumption must the consumer give up to get an additional unit of consumption in period...