Answered: Consider the following 2-period model…

Consider the following 2-period model with optimal saving. U(C1,C2) = 3 ln(C1) + 2 ln(C2) Y1 = 60 T1 = 10 Y2 = 30 T2 = 8 r = 0.10 What is the optimal saving, S*?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

Question

Consider the following 2-period model with optimal saving. U(C1,C2) = 3 ln(C1) + 2 ln(C2)

Y1 = 60

T1 = 10

Y2 = 30

T2 = 8

r = 0.10

What is the optimal saving, S*?

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