A university student recieved $1,000 upon graduation at age 20 years. This person was hired by one of the largest global petrochemical companies soon after graduation with an expected annual income of $250. Assume that the retirement age is 65 years and life expectancy is 85 years in the country in which the student resides. Given that this country has zero real interest rate and consumption smoothing is optimal for all individuals: a. Derive an expression for the person’s average propensity to consume. b. State in one sentence how the consumption puzzle is addressed

A university student recieved $1,000 upon graduation at age 20 years. This person was hired by one of the largest global petrochemical companies soon after graduation with an expected annual income of $250. Assume that the retirement age is 65 years and life expectancy is 85 years in the country in which the student resides. Given that this country has zero real interest rate and consumption smoothing is optimal for all individuals: a. Derive an expression for the person’s average propensity to consume. b. State in one sentence how the consumption puzzle is addressed

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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