Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider a household that discounts the future with 3 = 0.9. The real interest rate is 4 percent
and the flow utility function is u(c) = ln(c).
The household's lifetime budget constraint is given by C₁ +
household lives for two periods and has no initial wealth.
10,000 and y2 = 8,000.
Assume y₁
Calculate C₁.
Round your answer to the nearest dollar.
-
C2
1+R Y₁ +
-
Y2
1+R
Note the
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What is this household's marginal propensity to consume at c1 (in percent)?
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