3 Assume Peter's preferences over time (periods are yearly) are given byU(c1, c2, C3, C4, ·...) = In(c1) + Bln(c2) + B²In(c3)+....Assume that Peter can borrow or lend at the same rate r=10% and11.15Then, we know the following about how Peters consumption changes over time:O Peters consumption declines the older he gets.O Peters consumption increases the older he getsPeters consumption is constant over his life-timeWe can't tell anything about his consumption level because we have not beengiven any information about his income over his life-time.

The utility function is a key concept in economics that quantifies preferences across a range of…

Assume Peter's preferences over time (periods are yearly) are given by U(c1, C2, C3, C4, -...) = In(c1)+ Bln(c2) + B²In(c3)+.... Assume that Peter can borrow or lend at the same rate r=10% and 1 1.15 Then, we know the following about how Peters consumption changes over time: Peters consumption declines the older he gets. Peters consumption increases the older he gets Peters consumption is constant over his life-time )We can't tell anything about his consumption level because we have not been given any information about his income over his life-time.

Assume Peter's preferences over time (periods are yearly) are given by U(c1, C2, C3, C4, -...) = In(c1)+ Bln(c2) + B²In(c3)+.... Assume that Peter can borrow or lend at the same rate r=10% and 1 1.15 Then, we know the following about how Peters consumption changes over time: Peters consumption declines the older he gets. Peters consumption increases the older he gets Peters consumption is constant over his life-time )We can't tell anything about his consumption level because we have not been given any information about his income over his life-time.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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Assume Peter's preferences over time (periods are yearly) are given by U(C₁, C2, C3, C4, ....) = ln(c₁) + ßln(c₂) + ß²ln(c3)+ Assume that Peter can borrow or lend at the same rate r=10% and ß= 1 1.15 Then, we know the following about how Peters consumption changes over time: Peters consumption declines the older he gets. Peters consumption increases the older he gets Peters consumption is constant over his life-time We can't tell anything about his consumption level because we have not been given any information about his income over his life-time.
When analyzing how borrowing and lending affect the consumer's budget constraint, we measure spending in the current time period on the horizontal axis and spending in the future time period on the vertical axis. Assume that the interest rate at which the consumer can lend and borrow is 10%, income in period 1 is $1000 and income in period 2 is $1200. The point of maximum current consumption can be expressed as 1000+ 1200/1.1. 1000(1.1) + 1200. 1000+ 1200 + .1 1000/1.1 + 1200/1.1 + 1.
ming - Google Chrome atic/nb/ui/evo/index.html?deploymentld=D56736719115714608139104112999&elSBN=9781337096607&id3D709153691&snapshotld=D1586258& Q Search this course CENGAGE MINDTAP Homework (Ch 13) es The following table contains data for a hypothetical closed economy that uses the dollar as its currency. A-Z Suppose GDP in this country is $1,330 million. Enter the amount for investment. Value National Income Account (Millions of dollars) Government Purchases (G) 350 Taxes minus Transfer Payments (T) 455 Tips 700 Consumption (C) Investment (I) 280 ips Fial of bonga ITED Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table. National Saving (S) %3| million A+ 9:45 PM o search 4/3/202 hp f5 I f6 ins prt sc fg fg f12 II delete home end & 8. num backspace lock T. home %24
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Using this functional form in the intertemporal trade-off condition that you previ- ously derived, do some algebra to obtain an equation that specifies how much the individual would save as a function of q, β, y1 and y2.
During the 2007–2009 recession, the value of commonstocks in real terms fell by more than 50%. How mightthis decline in the stock market have affected aggregatedemand and thus contributed to the severity of therecession? Be specific about the mechanisms throughwhich the stock market decline affected the economy.
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The consumer views present and future consumption as perfect complements and would like to consume equal amounts in both periods, i.e., . Suppose, however, that there is a credit market imperfection that prevents this consumer from borrowing at all, i.e., . a. Show the consumer's lifetime budget constraint and indifference curves on a diagram. Note that because the consumer prefers to purchase present and future consumption in equal amounts, the indifference curves will be kinked at. Note also that because the consumer cannot borrow, the budget constraint will be kinked at the consumer's initial endowment. Recall that the budget constraint is given by: Recall also that the consumer's endowment for each period can be expressed as: b. Calculate the consumer's optimal current-period and future-period consumption and optimal saving and show this in your diagram. Does the existence of the credit market imperfection affect the consumer's choices? Recall that savings is given by: c. Suppose…
Suppose that conditions in the economy are such that the after-tax expected real interest rate is described by the equationRa = a X gWhere a is a number that depends on how people value their consumption in one period compared with another period, and g is the growth rate of the economy. The a equals 1 when people prefer consumption to be balanced, with the same amount of consumption each period; a may be bigger than the one when people prefer consumption today over consumption in the future, with a being larger and larger the more impatient people are:A - Suppose that a = 2, g = 0.02, the inflation rate is expected to be steady at pi = 0.03, and the tax rate is .40. What are the values of the equilibrium nominal interest rate and the before-tax expected real interest rate?B - Beginning with the situation in part a, if the growth rate of the economy increases to .04, what are the new values of the equilibrium nominal interest rate and the before-tax expected real interest rate?C -…
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