How do changes in interest rate affect expected consumption? Interprete the effect of interest rate on expected consumption in the light of precautionary saving
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How do changes in interest rate affect expected consumption? Interprete the effect of interest rate on expected consumption in the light of precautionary savings.
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- APPLIED ECONOMICS Topic: Intertemporal Choice Levinn’s utility function is expressed as the following: U= C1 C2 0.3 where C1 is his first periodconsumption and C2 is his second period consumption. His income in the first period is$2500 and interest rate is at 10%. If at equilibrium, Levinn is neither a borrower nor a lender,then what is his expected income in the second period? Do not copy from othersexplain using a two period indifference curve how an individual would respond to an increase in interest rate by increasing or decreasing saving, explain using graphsAPPLIED ECONOMICS Topic: Intertemporal Choice Levinn’s utility function is expressed as the following: U= C1 C2 0.3 where C1 is his first periodconsumption and C2 is his second period consumption. His income in the first period is$2500 and interest rate is at 10%. If at equilibrium, Levinn is neither a borrower nor a lender,then what is his expected income in the second period? Show the graph if possible
- How might a sudden increase in people’s expectationsof future real estate prices affect interest rates?If long-term interest rates are 8% and short-term interest rates are 3%, the market expects that: A) short-term rates will remain the same in the future. B) there is no relationship between long-term and short-term rates. C) short-term rates will rise in the future. D) short-term rates will fall in the future.The relationship between the price of the bond and the market rate of interest rate? *a. Inversely relatedb. Directly relatedc. Neither are relatedd. Not relatede. None of the choices
- Q4 a) When the demand of output decides how much to produce which type of demand prevails in the economy? B) Why investment is negatively related to interest rate?c) Give the equilibrium in the market for loans?Financial markets, Saving and Investment (chapter 13) Questions ---Explain how a consumption tax could lead to a decrease in real interest rates. Note Please Highly Requesting Do not Copy Paste Questions From Chegg, Or Courhero ..Last Time Questyions Line By Line Copy From Chegg. I Have Chegg, CourseheroDraw and explain a graph for a two-period consumer. Include the budget line, indifference curve, utility maximization, and all labels. a. Draw the effect of an increase in the interest rate. Show graphically and explain the effect on the level of consumption C1 and C2. b. Why would C1 change? Explain c. Why would C2 change? Explain
- Use the concepts of income effect and subsitution effect to explain why the effect on desired savings of an increase in the expected real interest rate is potentially ambiguous. Draw the saving curve for when (a) subsitution effect dominates (b) income effect dominates. I need help with the graphs. Pls solve all for good ratingplease help me analyze and answer the following with formula and explanation please so that i can learn. thank you. Please help me get: Determine the expected rate of return (r) c.) Determine the real interest rateConsumers deposit their total saving, equaling the value of 1, at the bank at t = 0. The bank invests all deposit in an illiquid asset, yielding R = 1.5 inperiod 2 and has a liquidation value of 1 at period 1. Consumers have the probability of 25 percent of being impatient and consume in period 1. Theremaining patient consumers want to consume in period 2. The bank offers r(1) = 1.10 and r(2) = 1.20 as payment to consumers who withdraw inperiod 1 and period 2 respectively. Suppose that consumers believe at period 1 that 70 percent of the consumers withdraw their deposits at period 1, will this believe trigger a bankrun?