Suppose that there are only 10 individuals in the economy each with the following utility function over present and future consumption: U (c1, c2) = c1 +C2, where ci is consumption today, and c2 is consumption tomorrow. Consumption tomorrow is less valued because people are impatient and prefer consuming now rather than later. Buying 1 unit of consumption today costs $1 today and buying 1 unit of consumption tomorrow costs $1 tomorrow. All individuals have income of $10 dollars today and no income tomorrow (because they will be retired) but they can save at the market interest rater> 0. How much of his or her income will an individual consume today given that the interest rate is 0.3? O. Less than half of it O. Exactly half of it O. The individual is indifferent between consuming today and saving O. More than half of it O. All of it O. None of it How much of his or her income will an individual consume today given that the interest rate is 0.5? O. Less than half of it The individual is indifferent between consuming today and saving O. None of it O. All of it O. More than half of it O. Exactly half of it Suppose that in this economy all the funds for capital come from savings by the 10 individuals. Firms' demand for capital is given by Qp = 100 – 100r. What is the market supply for funds if the interest rate is 30%? Qs = What is the market supply for funds if the interest rate is 70%? Qs = What is the equilibrium interest rate that clears the capital market? r = What is aggregate consumption in each period at that interest rate? C1 = C2 =
Suppose that there are only 10 individuals in the economy each with the following utility function over present and future consumption: U (c1, c2) = c1 +C2, where ci is consumption today, and c2 is consumption tomorrow. Consumption tomorrow is less valued because people are impatient and prefer consuming now rather than later. Buying 1 unit of consumption today costs $1 today and buying 1 unit of consumption tomorrow costs $1 tomorrow. All individuals have income of $10 dollars today and no income tomorrow (because they will be retired) but they can save at the market interest rater> 0. How much of his or her income will an individual consume today given that the interest rate is 0.3? O. Less than half of it O. Exactly half of it O. The individual is indifferent between consuming today and saving O. More than half of it O. All of it O. None of it How much of his or her income will an individual consume today given that the interest rate is 0.5? O. Less than half of it The individual is indifferent between consuming today and saving O. None of it O. All of it O. More than half of it O. Exactly half of it Suppose that in this economy all the funds for capital come from savings by the 10 individuals. Firms' demand for capital is given by Qp = 100 – 100r. What is the market supply for funds if the interest rate is 30%? Qs = What is the market supply for funds if the interest rate is 70%? Qs = What is the equilibrium interest rate that clears the capital market? r = What is aggregate consumption in each period at that interest rate? C1 = C2 =
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.14P
Related questions
Question
Suppose that there are only 10 individuals in the economy each with the following utility function over present and future consumption: U (c1, c2) = c1 +C2, where ci is consumption today, and c2 is consumption tomorrow. Consumption tomorrow is less valued because people are impatient and prefer consuming now rather than later. Buying 1 unit of consumption today costs $1 today and buying 1 unit of consumption tomorrow costs $1 tomorrow. All individuals have income of $10 dollars today and no income tomorrow (because they will be retired) but they can save at the market interest rater> 0.
How much of his or her income will an individual consume today given that the interest rate is 0.3?
O. Less than half of it
O. Exactly half of it
O. The individual is indifferent between consuming today and saving
O. More than half of it
O. All of it
O. None of it
How much of his or her income will an individual consume today given that the interest rate is 0.5?
O. Less than half of it
The individual is indifferent between consuming today and saving
O. None of it
O. All of it
O. More than half of it
O. Exactly half of it
Suppose that in this economy all the funds for capital come from savings by the 10 individuals. Firms' demand for capital is given by Qp = 100 – 100r.
What is the market supply for funds if the interest rate is 30%? Qs =
What is the market supply for funds if the interest rate is 70%? Qs =
What is the equilibrium interest rate that clears the capital market?
r =
What is aggregate consumption in each period at that interest rate?
C1 =
C2 =
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you