Ct: consumption at period t Yt: income at period t Ct+1: consumption at period t+1 Yt+1: income at period t+1 r: interest rate Choose the budget constraint Select one: a. (1+r) (Y₁-C₁) +Yt+1=Ct+1 b. Yt+Yt+1=Ct+1+Ct c. Yt-Ct=Yt+1-Ct+1 d. Y₁+1=(1+r) Yt+Ct+1-C₁(1+r)
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- Let the equilibrium condition for national income be ?(?) + ?(?) = ?(?) + ? (? ′ , ? ′ ,? ′ > 0; ? ′ + ? ′ > ? ′ ) Where S, Y, T, I and G stand for saving, national income, taxes, investment and government expenditure respectively. All derivatives are continuous a. Interpret the economic meaning of the derivatives ? ′ , ? ′&? ′ b. Check whether the conditions for the implicit function theorem are satisfied. If so, write the equilibrium identity c. Find ??̅ ?? and discuss its economic implications“Permanent Income of consumption is just the average of all current and future incomes. Thus, one does not need to do the maximisation of intertemporal utility”. True or False. Discuss according to the model. Note that you need to discuss according to the model?There are some simplifying assumptions in order to generate simple expressions. One of these assumptions is that r (interest rate) = ρ (rate at which household discounts future). Suppose we relaxed this assumption (i.e. allowed r to differ from ρ). Two results of the model are: i) The household keeps the expected value of consumption constant over time. ii) The household responds differently to permanent versus temporary income changes. Discuss the implications of allowing r to differ from ρ on each of these results
- Need answer. Absuletly upvote!! A. Graphically derive the IS curve from the goods market equilibrium. Hint: start from equilibrium in goods market and the analyze the effect of a change in interest rate i on Y.What is meant by “excess sensitivity” of consumption? Is this view of consumption consistent with the permanent-income hypothesis? Explain. How does the stock market affect consumption according to the permanent-income hypothesis? Is this prediction in line with the empirical evidence? Explain.(A) Derive the equation for the IS curve and LM curve. (B) Compute the equilibirum levels of income, Y and interest rates.
- A consumer's current income (y) is 200 and the future income ( t.') is 240. A current lump sum tax (t) of 10 is paid and the tax in the next period (t) is 15. The real interest rate is 20% for each period. Please assume that current and future consumption are complements. and the consumer always prefers to have one unit of current consumption and two units of consumption in the future. Calculate the optimal current and future consumption and the optimal current and future savings. Is the consumer a lender or a borrower? How does he she. as a lender or a borrower. affect the future consumption?Evaluating the relationship between R&D expenditures and net income is an example of the diagnostic analytics of __________. Multiple Choice determining relations/patterns/linkages between variables through statistical analysis performing drill-down detailed analytics identifying anomalies/outliers performing descriptive analyticsThe US economy slowed significantly in early 2008, and policy makers were extremely concerned about growth. To boost the economy, Congress passed several relief packages (the Economics Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009) that combined would deliver about $700 billion in government spending. Assume, for the sake of argument, that this spending was in the form of payments made directly to consumers. The objective was to boost the economy by increasing the disposable income of American consumers. a. Calculate the initial change in aggregate consumer spending as a consequence of this policy measure if the marginal propensity to consume (MPC) in the US is 0.5. Then calculate the resulting change in real GDP arising from $700 billion in payments. b. Illustrate the effect on real GDP with the use of a graph depicting the income-expenditure equilibrium. Label the vertical axis "Planned Aggregate Spending, AE planned" and the horizontal axis "Real GDP."…
- A consumer's current income (y) is 200 and the future income ( t.') is 240. A current lump sum tax (t) of 10 is paid and the tax in the next period (t') is 15. The real interest rate is 20% for each period. Please assume that current and future consumption are complements. and the consumer always prefers to have one unit of current consumption and two units of consumption in the future.Calculate the consumer's lifetime wealth.Calculate the optimal current and future consumption and the optimal current and future savings. Is the consumer a lender or a borrower? How does he she. as a lender or a borrower. affect the future consumption?1. Given ln Qda = 2.35 – 0.12 ln Pa - 0. 25 ln Y + 0.18 ln Pb – 0.26 ln Pc, (all in logarithmic form), which of the following is correct? Note: Qda is the quantity demanded for product “a”, Pa is the price of product “a”, Pb is the price of product “b”, Pc is the price of product “c” and Y is the income, ln means natural logarithm. A. the demand for product “a” is price inelastic B. the demand for product “a” is price elastic C. a 1% increase in the Pa will cause a 0.12% decrease in the demand for product “a” D. A and C are correct E. B and C are correct 2. Given: ln Qda = 2.35 – 0.12 ln Pa - 0. 25 ln Y + 0.18 ln Pb – 0.26 ln Pc, (all in logarithmic form), which of the following is correct? The definition of the variables are found in #1. A. product “a” and product “b” are substitutes B. product “a” and product “b” are complementary C. a 1% increase in the Pb will increase the demand for “a” by 0.18% D. A and C are correct E. B and C are correct 3. Given: ln Qda = 2.35 – 0.12 ln Pa…Discuss the lifecycle income hypothesis theory of consumption and explain its applicability in the Kenyan context.