EBK MACROECONOMICS (FOURTH EDITION)
4th Edition
ISBN: 9780393616125
Author: Jones
Publisher: YUZU
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Chapter 7, Problem 6E
To determine
Calculate the present discounted value.
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Please give me correct and incorrect answer explation
Kevin has a wage income of $10,000 in the present and $15,000 in the future. His utility is given as U = min (4cp, 5cf), where cp denotes consumption today and cf consumption in the future. The relevant interest rate is 10%.
a. If the interest rate were to increase to 15 percent,would Kevin be better off or worse off? Explain.
b. Find two measures to indicate how much better off or worse off Kevin is as a result of the increase in interest rates. Explain.
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EBK MACROECONOMICS (FOURTH EDITION)
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