In the two-period Fisher model of consumption, suppose that the first period income is $5,000 and the second period income is $5,000 for both Matt and Paola. The interest rate is 10 percent. Matt’s lifetime utility function is C1 + C2 while Paola’s lifetime utility function is C1 + 0.8C2. If there is a borrowing constraint, whose consumption is affected by that
Q: Ana's Big Burger is a small restaurant that sells hamburgers. For Ana, grills are a fixed input and…
A: Marginal physical product of labor shows the change in total product when one more labor is hired.…
Q: The flow of payments for goods or services within an ecosystem is called... The product flow The…
A: Circular flow is a model used to represent the flow of goods, services, and money in an economy.
Q: n Delhi, a haircut costs 135 rupees (INR). The same haircut costs 15 Singapore dollars (SGD) in…
A: Exchange rate is the rate of exchange the domestic currency with foreign currency , every currency…
Q: Draw a demand curve and a supply curve for one of your favourite goods and explain why the point of…
A: If a good is normal then consumers income and good's demand have positive relationship. Which means…
Q: Consider a hypothetical small island nation in which the only industry is weaving. The following…
A: Physical capital can be defined as the capital required to produce goods and services. This may…
Q: What would be the effect of a hurricane that damages buildings and roadways in the Gulf Coast? LRAS…
A: The AS-AD model, also known as the Aggregate Supply-Aggregate Demand model, is an economic model…
Q: If Honduras is open to international trade in oranges without any restrictions, it will import…
A: Domestic demand and supply refer to the quantity of goods and services that consumers and producers…
Q: 25 20 15 10 5 O P COUNTRY 1 VIO s1 FIP d1 EQ 0 3 6 9 1215182124 INTERNATIONAL MARKET P 25 20 15 10 5…
A: International trade involves the import and export of goods and services, and it allows countries to…
Q: What is/are the contribution/s of Crayola in Socio-Economic Globalization?
A: Socio-economic globalization refers to the interconnectedness and integration of the world's…
Q: Complete the following table by determining Hubert's accounting and economic profit of his boat…
A: Implicit cost refers to the opportunity cost which is involved in doing a business. It is not a…
Q: a. At a product price of $56.00 (i) Will this firm produce in the short run? Yes (ii) If it is…
A: There are instances where the firm cannot immediately recover all of its costs. It then needs to…
Q: Explain the reasons for rising income inequality in the United States. If there are arguments…
A: The term income inequality indicates the extent to which income is ununiformly distributed…
Q: Suppose that for a particular perfectly competitive firm the AVC function is given by: AVC=200-7.5Q…
A: Dear student, you have asked multiple sub-part questions in a single post.In such a case, as per the…
Q: a. Explain whether each of the following is an example of a macroeconomic or a microeconomic…
A: A change is demand is associated with change in factors like income of the consumer, tastes and…
Q: Republika UPLB has 50 workers. It produces only coffee and white cheese. The production of these two…
A: Production possibility curve shows the combination of two goods that can be produced with the use of…
Q: Definition The stock of money people hold to pay everyday predictable expenses The stock of money…
A: Since you have posted multiple questions, we will provide the solution to only the first question as…
Q: Which of the following conditions differentiate Marx's analysis of surplus value the the…
A: Marx's analysis of surplus value is a central component of his critique of capitalism. In Marx's…
Q: Until recently, Dave's Donuts sold their premium chocolate-cornflake-cronut for $3.75, and they…
A: When we will use the average percentage change in both quantity and price,then this is called the…
Q: Warm-glow: now consider the case where each individual cares only about their direct marginal…
A: Marginal Benefit: Warm-glow Marginal Benefit: Marginal Cost: MBA=7-N, MBB=7-½N MBC=23-½N…
Q: The following graph illustrates the market for almonds. It plots the monthly supply of almonds and…
A: We have given the market demand curve for almonds and the market supply curve for almonds.…
Q: Who benefited from this tariff? Choose one or more: A. Mexican sugar producers B. non-Mexican…
A: As a sugar is a staple good and is not differentiable on the attribute that whether it is imported…
Q: Task 10 Which of the following statement (s) correct: a) When the real interest rate is relatively…
A: Considering the 4 given statements and the reasoning, the statements which are considered to be true…
Q: Suppose that the government imposes a per-unit tax on cell phones. The tax is imposed on producers…
A: Equilibrium is where the demand curve intersects the supply curve. Tax on supplier leads to…
Q: The following table shows levels of real income per person in several economies during the years…
A: The annual growth rate in economics refers to the percentage increase in an economic variable, such…
Q: The following graph displays four supply curves (HH, II, JJ, and KK) that intersect at point A.…
A: Elasticity measures the change in quantity due to change in price. The supply curve is upward…
Q: a. Explain whether each of the following is an example of a macroeconomic or a microeconomic…
A: Disclaimer: - Since you asked multipart question, we are solving first 3 subparts of first question…
Q: Real GDP per capita is found by: Multiple Choice adding real GDP and population. subtracting…
A: One of the broad indicators of a country's economic development is national income. It more closely…
Q: Describe the five (5) different types of legal systems within which international businesses may…
A: Therefore, the legal system must offer a means of ascertaining the veracity and justice of the…
Q: If labor costs are 60 percent of production costs, then a 15 percent increase in wage rates would…
A: Production cost refers to the money expenses incurred on various inputs such as raw material,…
Q: How does the impact of fixed costs change production decisions in the short run and in the long run?…
A: Fixed cost refers to the cost which remains the same at each level of output. It means that fixed…
Q: The following graph shows the aggregate demand (AD) and aggregate supply (AS) curves in the goods…
A: Since you have posted multiple questions, we will provide the solution to only the first six…
Q: 10. Price elasticity of supply in the short run and long run The following graph shows the long-run…
A: Supply curve is the upward sloping curve. Elasticity measures the change in quantity due to change…
Q: Using the AD-LRAS model, which of the following causes the price level to decrease and real…
A: The Aggregate Demand-Long-Run Aggregate Supply (AD-LRAS) model is a framework for analysing the…
Q: A monopoly is considering selling several units of a homogeneous product as a single package.…
A: A monopoly is selling homogenous products as a single package. The optimal number of units to put…
Q: Calculate the effective annual interest rate for 15% corresponding to each of the following: (a)…
A: The effective annual interest rate (EAR) is the interest rate that is adjusted for compounding over…
Q: Consider the following data (all values are in billions of dollars): (b) Currency Transactional…
A: Money multiplier relates the monetary base to the supply of money.The formula to compute the…
Q: Briefly discuss at least one of the outcomes of the 2008 Oregon Experiement? Briefly discuss why…
A: The Oregon Experiment was a research study conducted in the year 2008 that was done to assess the…
Q: The graph shows the demand for on-campus student housing at Purdue University in Lafayette, Indiana.…
A: A price ceiling refers to a government rule that makes it illegal to charge a price higher than a…
Q: Calculate the surplus caused by the price floor.
A: A price floor is the government-imposed minimum price set for a product. A price floor is binding…
Q: You are the owner of a local Honda dealership. Unlike other dealerships in the area, you take pride…
A: Given: N=3EM=-1.8MC=$13,000 Here N is the total number of dealers in the market EM is the market…
Q: Assume that you are on an island where there are only two commodities—coconuts and pineapples—and…
A: Budget constraint is the line that joins all those bundles of two goods that a consumer can purchase…
Q: stating the assumptions you need to make to determine demand, and then show, using diagrams, how the…
A:
Q: Which federal agency is the source of consumer price index (CPI) data? O The U.S. Bureau of Labor…
A: Consumer price index (CPI) measures the change in the price of a market basket bought by consumer…
Q: Demand studies in health care have provided estimates of both income and price elasticity. Estimates…
A: The responsiveness of demand for an item or service to changes in income is measured by income…
Q: Consider the following production function. Y=KUSNO.S. Consider K/N=1. Now consider a doubling of…
A: Production function shows the relation between physical input and physical output , or in simple…
Q: Q1. Why do countries impose trade restrictions?
A: Since you have asked multiple question, we will answer first question for you. If you want any…
Q: Give me one 2 threats/opportunity of Jollibee corporation interms either inflation/interest…
A: Jollibee Corporation, a Filipino multinational fast food chain, faces various threats and…
Q: Victorian Bank's assets consist of $5600.00 in reserves and $13600.00 in bonds. In terms of…
A: Victorian Bank's assets consist of $5600 in reserves and $13600 in bonds. => Assets = Reserves +…
Q: Consider the strategic voting game discussed at the end of this chapter, where we saw that the…
A: In game theory, a Nash equilibrium is a concept that describes a set of strategies, one for each…
Q: Consider the fictitious firm, Icelandic Investment Managers (IIM). The company hire investment…
A: An isoquant is a graphical representation of the various combinations of two or more inputs that can…
In the two-period Fisher model of consumption, suppose that the first period income is $5,000 and the second period income is $5,000 for both Matt and Paola. The interest rate is 10 percent. Matt’s lifetime utility function is C1 + C2 while Paola’s lifetime utility function is C1 + 0.8C2. If there is a borrowing constraint, whose consumption is affected by that?
Step by step
Solved in 2 steps
- According to Irving Fisher’s two period model, if the consumers face borrowing constraint, the first-period consumption cannot exceed first-period income True FalseWhat 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.Consider an economy where individuals live for two periods only. Their utility function over consumption in periods 1 and 2 is given by U = 2 log(C1) + 2 log(C2), where C1 and C2 are period 1 and period 2 consumption levels respectively. They have labor income of $100 in period 1 and labor income of $50 in period 2. They can save as much of their income in period 1 as they like in bank accounts, earning interest rate of 5 percent per period. They have no bequest motive, so they spend all their income before the end of period 2. a. What is each individual’s lifetime budget constraint? If they choose consumption in each period so as to maximize their lifetime utility subject to their lifetime budget constraint, what is the optimal consumption in each period? How much do the consumers save in the first period? b. Suppose that the government introduces a social security system that will take $10 from each individual in period 1, put it in a bank account, and transfer it back to…
- Consider the Two-Period Endowment Model of the Household studied in class. Suppose that optimal consumption period is given by: where ωe is the household's lifetime wealth (after taxes). Is the optimal consumption behaviour implied by (1) consistent with the Permanent Income Hypothesis? Why?If you draw the cash flows from any investment, you would have negative cash flows at the beginning, and then you would receive a stream of positive cash flows thereafter. So why do we need the separate concept of a J-curve? In other words, what is the difference between a J-curve and the cash profile of any other investment?If your firm wants to test whether a person's state of residence affected their interest in saving, it would be evaluating a ________ asymmetrical causal relationship. Multiple Choice disposition-behavior property-behavior stimulus-property property-disposition
- Indicate whether the statement is true or false, and justify your answer.Consider two investment streams w and z which pay out some amount, w(t) and z(t), in each period t. (The amount may be negative in some periods.) If the interest rate is exactly equal to the internal rate of return of w(t), the net present value of choosing w over z is zero.True or False: It is possible, in a basic hours towards leisure and income towards consumption model, that the Earned Income Tax Credit can encourage more hours towards leisure, less hours towards work and more money towards consumption.Consider the two-period endowment economy we discussed in class. In this economy, a household lives for two periods and can save s. The return on saving is the real interest rate,r. Income is exogenous and given as y and y'. Households have utility overconsumption,c, in each period by U(c)=In(c)+B In(c') where future utility is discounted with rate B. Households choose consumption in both periods,c and c'. 1-Write down the current period and future period budget constraints. Derive the lifetime budget constraints. 2-What is the slope of the lifetime budget constraint? What are the intercepts? What is the significance of the endowment point? 3-Write down the expression for the consumer's optimization problem. What is the tangency condition? Provide an intuitive explanation for this condition. 4-Solve for c,c', and s. Given that B=1 and r=0, how would you modify the answers for c,c; and s? Explain.
- Assume an intertemporal budget constraint that shows how consumption can be traded off between two periods, t and t+1. Assume the consumer can save and borrow at the same interest rate of 10%. Assume the consumer collects income of $100 in each period. To gain an extra $10 dollars in period t+1, what must the consumer give up in period t?Consider an individual who lives for two periods and has utility of lifetime consumption U = log(C1) + 1/1+δ log(C2), where C1 and C2 are the consumption levels in the first and second period respectively, and δ, 0 1 > 0 in the first period and no income in the second period, so Y2 = 0. He can transfer some income to the second period at a before-tax rate of return of r, so saving $S in the first period gives $[1 + r]S in the second period. The government levies a capital tax at rate τ on capital income received in the second period. The tax proceeds are paid as a lump-sum transfer to the following generation. The present generation does not care about the next one. a. What is the lifetime consumption profile of this individual? What is his lifetime indirect utility function expressed as a function of Y1 and b. Evaluate the change in initial income Y1 that is required to compensate the individual for the welfare loss due to the capital income tax τ. c. What is…In the intertemporal choice model (C0 and C1 ) an individual is endowed with only future goods and no current goods. A drop in the real interest rate would cause the budget line to ______and move______. a. steepen, downward b. steepen, upward c. flatten, downward d. flatten, upward e. keep a constant slope, upward Note : I know the correct answer is D) but PLEASE DRAW A PICTURE TO HELP EXPLAIN THE ANSWER TO THIS QUESTION!!!!