4. Consider the above two-periods endowment economy. Suppose there are identical agents but with different endowments. There are a number of L₁ Type 1 agents with endowments Y (1) = 1, Yt+1(1) = 0, and a number of L₂ type 2 agents with endowments Y (2) = 0, Yt+1(2) = 1. Then a. At time t, type 1 agent has more consumption than type 2 agent b. At time t, type 2 agent has more consumption than type 1 agent c. Since this is an endowment economy, saving must be zero: type 1 agent will have 0 consumption at t+1 d. The equilibrium interest depends on individual income heterogeneity

4. Consider the above two-periods endowment economy. Suppose there are identical agents but with different endowments. There are a number of L₁ Type 1 agents with endowments Y (1) = 1, Yt+1(1) = 0, and a number of L₂ type 2 agents with endowments Y (2) = 0, Yt+1(2) = 1. Then a. At time t, type 1 agent has more consumption than type 2 agent b. At time t, type 2 agent has more consumption than type 1 agent c. Since this is an endowment economy, saving must be zero: type 1 agent will have 0 consumption at t+1 d. The equilibrium interest depends on individual income heterogeneity

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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