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! 10 in the future period. The real interest rate is 0.1, or 10%, per period. Suppose that current and future consumption are perfect complements for the consumer and that he or she always wants to have equal consumption in the current and future periods. b) What are the optimal current-period and future-period consumption (rounded to nearest integer)? C c) Suppose the consumer gets an unexpected increase in current income and y = 140. What will happen? OA Future consumption goes up, current consumption goes up and saving goes up.

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! 10 in the future period. The real interest rate is 0.1, or 10%, per period. Suppose that current and future consumption are perfect complements for the consumer and that he or she always wants to have equal consumption in the current and future periods. b) What are the optimal current-period and future-period consumption (rounded to nearest integer)? C c) Suppose the consumer gets an unexpected increase in current income and y = 140. What will happen? OA Future consumption goes up, current consumption goes up and saving goes up.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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