How do the life cycle hypothesis and the permanent-income hypothesis resolve the apparent contradiction between the short run data, which suggests a non proportional relationship between consumption and income, and the long run data, which suggests a proportional relationship?

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Q: 50 - 3Ed and w = 10 + Es. Please show work for each part. a.What is the equilibrium wage of this…

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A: Complement Goods: Goods that are used with a combination of other good is called complement goods.…