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- 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 t=20 in the current period and t'= 10 in the future period. The real interest rate is 0.1, or 10%, per period. (a) Determine the consumer's lifetime wealth. (b) Suppose that current and future consumptions are perfect complements for the con sumer and that he or she always wants to have equal consumption in the current and future periods. Draw the consumer's indiffer ence curves. (c) Determine what the consumer's optimal current-period and future-period consump tions are, and what optimal saving is, and show this in a diagram with the consumer's budget constraint and indifference curves. Is the consumer a lender or a borrower?14. To use the Net Present Value (NPV) method of capital budgeting, one could calculate the present value of all the future net cash flows of an investment discounted at its cost of capital, and then subtract which one of the following? OA. The salvage value OB. The present value of the salvage value OC. The initial cost of the investment OD. The initial cost of the investment less the present value of the salvage valueA 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 t=20 in the current period and t'= 10 in the future period. The real interest rate is 0.1, or 10%, per period. (a) Determine what the consumer's optimal current-period and future-period consump tions are, and what optimal saving is, and show this in a diagram with the consumer's budget constraint and indifference curves. Is the consumer a lender or a borrower? (b) Now suppose that instead of y = 100 the consumer has y = 140 Again, determine optimal consumption in the current and future periods and optimal saving, and show this in a dia gram. Is the consumer a lender or a borrower? (c) Explain the differences in your results be tween parts (a) and (b).
- Bora's income in the current period is y=200, and income in the future period is y'=250. He pays lump-sum taxes t=30 in the current period and t'=10 in the future period. The real interest rate is 5%, per period.Suppose that Bora will always choose current consumption, c and the future consumption, c′ in a constant proportion:c=32c′ a) Determine the optimal current-period and future-period consumption for Bora. b) Determine the optimal saving for Bora, and show this in a diagram with his budget constraint and indifference curves, and also determine if Bora is a lender or a borrower?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?assume elsa has current income of $50000 and expects income of $60000 next period. interest rate is 6% elsa desires to have the same amount of consumption expenditure during both periods. in the two period certainty framework, determine how much elsa's expenditures are during each period is elsa a saver or spender
- Consider the following 2-period model U(C1,C2) = min{3C1,4C2} C1 + S = Y1 – T1 C2 = Y2 – T2 + (1+r)S Where C1 : first period consumption C2 : second period consumption S : first period saving Y1 = 20 : first period income T1 = 5 : first period lump-sum tax Y2 = 50 : second period income T2 = 10 : second period lump-sum tax r = 0.05 : real interest rate Find the optimal saving, S*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?Which of the following results in an increase in consumers’ lifetime wealth, i.e. an increase in the net presentvalue of lifetime income? (a) Increase in interest rate(b) Decrease in future wages(c) Decrease in interest rate(d) Decrease in current taxes, financed by an increase in future taxes
- Determine the equilibrium income y and interest rate r,given the following information about the commodity market C=0.6Y+60 I=-40r+1300 Where C and I dwnote consumption and planned invesment ,respectively,and the following information about the money market Ms=600L1=0,2y L2=-30r+40Suppose that firms produce according to the production function Y = AK1/2L1/2, where A = 5 andL = 400. Assume that the prices of capital and output are equal and that the real interest rate, r, isequal to 0.25 and the depreciation rate, δ, is equal to 0.1.1. If firms operate according to the neoclassical theory of investment, what is the optimal levelof capital stock, K (YP) to rich (YR).22. Suppose that the government offers an investment tax credit which changes the relative priceof capital. This results in Pk = 3 and P = 6. What is the new optimal level of capital stock,K??3. Does the investment tax credit have an expansionary impact on the economy? Explain whyor why not.4. Based on the optimal capital stock computed in part (2), what is the level of investmentneeded to sustain this level of capital stock?Suppose the macroeconomic parameters are as follows in Turkey. Production: Y = A K1/3 L2/3 (A= 7 ) Factor supplies: K, L (K = 3000, and L= 1300) Government: 2200, Taxes: 2000 Consumer behavior C = 1000 + 0.6 (Y-T Investment behavior | = 3000 - 1000г Compute real interest rate in Turkey (Show the percentage value as numerical such as 15 for %15 or 0.15).