If MPC = 0.75 (and there are no income taxes) when G increases by 100, then the IS curve for any given interest rate shifts to the right by: A) 100. B) 200. C) 300. D) 400.
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- If Peregrine consumes(1,500,880)and earns(1,300,1,100)and if the interest rate is10%, the present value of his endowment isDrive the is curve mathematically anf graphically when investment function is more sensitive to rate of interestA university student was bequeathed $2,000 upon graduation at age 20 years. This person was hired by one of the largest global tech 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: Derive an expression for the person’s lifetime resources clearly describing each term. Calculate the value of the person’s lifetime resources. Derive an expression for the person’s consumption function clearly describing any new terms included. Derive an expression for the person’s average propensity to consuming. State the theory on which you based the calculations in parts i., ii. and iii. above.
- Assuming a mix of present and future consumption is preferred, ANY consumer who starts at point A will gain utility from a rise in interest rates. is it true or falseJack’s Lock and Key are considering remodeling. It estimates that the remodeling will cost $6,000 and that as a result revenues will rise by $3,000 the first year, $2,500 the second year, $1,500 the third year, and have no effect after then. If the interest rate is 5%, should Jack’s remodel? Defend your answer by showing your work.Assume a consumer has current-period income y = 200, future-period income y′ = 150, current and future taxes t = 40 and t′ = 50, respectively, and faces a market real interest rate of r = 0.05, or 5% per period. The consumer would like to consume according to the following utility function: U (c, c′ ) = ln(c) + ln(c′ ). Show mathematically the lifetime budget constraint for this consumer. Find the optimal consumption in the current and future periods and optimal saving. Suppose that instead of r = 0.05 the interest rate is r = 0.1. Repeat parts (a) and (b). Does the substitution effect or the income effect dominate?
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