Assume an economy with 1000 consumers. Each consumer has income in the current period of 50 units and future income of 60 units and pays a lump-sum tax of 10 in the current period and 20 in the future period. The market real interest rate is 8%. Of the 1000 consumers, 500 consume 60 units in the future, while 500 consume 20 units in the future. a. Determine each consumer's current consumption and current saving. For the group of consumers that consume 60 units in the future, current consumption is 21.48, and current saving is 18.52. For the group of consumers that consume 20 units in the future, current consumption is 58.52, and current saving is -18.52 (Round to two decimal places as needed.) b. Determine aggregate private saving, aggregate consumption in each period, government spending in the current and future periods, the current-period government deficit, and the quantity of debt issued by the government in the current period. Aggregate consumption in the current period is 40,000. government spending in the current period is 10,000, and aggregate private saving is 0. The current-period government deficit is 0, and the quantity of debt issued by the government in the current period is 0 Aggregate consumption in the future period is 40,000, and government spending in the future period is 20,000 (Round to the nearest whole number as needed.) c. Suppose that current taxes increase to 15 for each consumer. Repeat parts (a) and (b) and explain your results. For the group of consumers that consume 60 units in the future, current consumption is 16.49, and current saving is 18.52 For the group of consumers that consume 20 units in the future, current consumption is 53.52, and current saving is - 18.52 (Round to two decimal places as needed.) After the increase in current taxes, aggregate consumption in the current period is current period is, and aggregate private saving is government spending in the The current-period government deficit is ☐and the quantity of debt issued by the government in the current period is ☐, and government spending in the future period is (Round to the nearest whole number as needed.) Aggregate consumption in the future period is
Assume an economy with 1000 consumers. Each consumer has income in the current period of 50 units and future income of 60 units and pays a lump-sum tax of 10 in the current period and 20 in the future period. The market real interest rate is 8%. Of the 1000 consumers, 500 consume 60 units in the future, while 500 consume 20 units in the future. a. Determine each consumer's current consumption and current saving. For the group of consumers that consume 60 units in the future, current consumption is 21.48, and current saving is 18.52. For the group of consumers that consume 20 units in the future, current consumption is 58.52, and current saving is -18.52 (Round to two decimal places as needed.) b. Determine aggregate private saving, aggregate consumption in each period, government spending in the current and future periods, the current-period government deficit, and the quantity of debt issued by the government in the current period. Aggregate consumption in the current period is 40,000. government spending in the current period is 10,000, and aggregate private saving is 0. The current-period government deficit is 0, and the quantity of debt issued by the government in the current period is 0 Aggregate consumption in the future period is 40,000, and government spending in the future period is 20,000 (Round to the nearest whole number as needed.) c. Suppose that current taxes increase to 15 for each consumer. Repeat parts (a) and (b) and explain your results. For the group of consumers that consume 60 units in the future, current consumption is 16.49, and current saving is 18.52 For the group of consumers that consume 20 units in the future, current consumption is 53.52, and current saving is - 18.52 (Round to two decimal places as needed.) After the increase in current taxes, aggregate consumption in the current period is current period is, and aggregate private saving is government spending in the The current-period government deficit is ☐and the quantity of debt issued by the government in the current period is ☐, and government spending in the future period is (Round to the nearest whole number as needed.) Aggregate consumption in the future period is
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Assume an economy with 1000 consumers. Each consumer has income in the current period of 50 units and future
income of 60 units and pays a lump-sum tax of 10 in the current period and 20 in the future period. The market
real interest rate is 8%. Of the 1000 consumers, 500 consume 60 units in the future, while 500 consume 20 units in
the future.
a. Determine each consumer's current consumption and current saving.
For the group of consumers that consume 60 units in the future, current consumption is 21.48, and current saving is
18.52. For the group of consumers that consume 20 units in the future, current consumption is 58.52, and current
saving is -18.52
(Round to two decimal places as needed.)
b. Determine aggregate private saving, aggregate consumption in each period, government spending in the current
and future periods, the current-period government deficit, and the quantity of debt issued by the government in the
current period.
Aggregate consumption in the current period is 40,000. government spending in the current period is 10,000, and
aggregate private saving is 0. The current-period government deficit is 0, and the quantity of debt issued by the
government in the current period is 0 Aggregate consumption in the future period is 40,000, and government
spending in the future period is 20,000
(Round to the nearest whole number as needed.)
c. Suppose that current taxes increase to 15 for each consumer. Repeat parts (a) and (b) and explain your results.
For the group of consumers that consume 60 units in the future, current consumption is 16.49, and current saving is
18.52 For the group of consumers that consume 20 units in the future, current consumption is 53.52, and current
saving is - 18.52
(Round to two decimal places as needed.)
After the increase in current taxes, aggregate consumption in the current period is
current period is, and aggregate private saving is
government spending in the
The current-period government deficit is ☐and the
quantity of debt issued by the government in the current period is
☐, and government spending in the future period is
(Round to the nearest whole number as needed.)
Aggregate consumption in the future period is
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