Use the two-period model from the Appendix to answer this question. Your current income is 40,000. Your next period (future) income is known to be 40,000. If your current consumption expenditure is 32,000, your (current) level of savings S=____(En
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Use the two-period model from the Appendix to answer this question.
Your current income is 40,000. Your next period (future) income is known to be 40,000.
If your current consumption expenditure is 32,000, your (current) level of savings S=____(Enter your answer as a whole number.)
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- 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?Q1. Consider the following two-period model of consumption and saving: Utility = C1^0.5 + B*C2^0.5 C1 + C2/(1+r) = Y1 + Y2/(1+r) where Y1 = 4, Y2 = 1, r = 0.17 and B = 0.5. Find a numerical solution for period 1 consumption, C1. (State your answer to 2 decimal places.)Using the figure below, graphically prove that the consumer saves less when his future income increases.
- True or false Disposable income is the income that remains to the household for the use of consumption after paying all the taxes.Assume you have $2,000 autonomous consumption and given $10,000 disposable income did not allow you to save anything. What will be your MPC?The life cycle model of consumption argues that people consume and save in different proportions as they age. Seniors tend to consume more than save as their lives adjust to the realities of old age. Assuming the hypothesis is true, how would the aging of the very large baby boomer generation affect consumption and income?
- As shown in Exhibit 2, savings occurs: Group of answer choices at 0. between 0 and $4 trillion. at $2 trillion. where disposable income is greater than $4 trillion.If Samantha's income is reduced to zero after she loses her job, her consumption will be ________ and her saving will be ________. Group of answer choices greater than zero; less than zero less than zero; less than zero greater than zero; greater than zero less than zero; greater than zeroA college professor is planning for his retirement years. His utility function is ?(?t , ?r ) = 3c t 0.5+2cr0.5 where ct represents his consumption today (period 1), his active years of teaching, and cr represents his consumption in his retirement years (period 2). During his active years of teaching, he makes a total of ₺3 million, while in his retirement years his total income is ₺1 million. He can borrow or lend at an interest rate of 25% between the two periods. Write an equation that describes the professor’s budget assuming he will spend all his income during his lifetime. If the professor chooses neither to borrow nor to lend during his active years, what will be his marginal rate of substitution between his consumption today and his retirement years? If the professor aims at maximizing his utility, how much does he consume in each period (use the Lagrangian method)? Does he save for his retirement years? If so, how much? At what interest rate would the professor…
- Suppose a consumer has $1500 in the current time period and $1100 in the future time period.Suppose also that the consumer can borrow and lend freely and, unless otherwise specified, borrowing and lending interest rates are the same. (a) If the interest rate between time periods is 50%, what is the budget constraint between consumption in the present and consumption in the future? (B) If the interest rate at which the consumer can borrow is 75% but the rate at which she can lend is25%, what is the budget constraint? (C) Suppose the interest rate is 50%. If the consumer has to pay a fee of 10% of the loan amount in order to borrow money, what is the budget constraint?Marginal propensity to save is: A total saving divided by total income. B the change in total saving divided by the change in total income. C total saving when total income is zero. D total saving that is based on expected future income.Disposable income is the amount a household has A after subtracting autonomous spending. B after subtracting taxes and transfer payments to income. C sometimes called discretionary spending. D available for consumption spending and saving.
