Assume you are 20 year old, with zero initial wealth, planning to work until the age of 50 and expecting to live to age of 75. You are expected to earn a constant annual salary of €70,000. Task: estimate lifetime consumption Now, suppose your €10,000 transitory increase to your income in your first year of work, what happens to your lifetime income?. What is the magnitude of the transitory MPC, which completely smooths income?

Assume you are 20 year old, with zero initial wealth, planning to work until the age of 50 and expecting to live to age of 75. You are expected to earn a constant annual salary of €70,000. Task: estimate lifetime consumption Now, suppose your €10,000 transitory increase to your income in your first year of work, what happens to your lifetime income?. What is the magnitude of the transitory MPC, which completely smooths income?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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