Chapter 16: Understanding Consumer BehaviorQuestion: The consumer's budget constraint reflects the fact that because interest is earned onsavings future ...is worth ..... than currentww. .....O a. income / less / income.b.consumption /more /income.consumption / more / consumption.O d. income / more / income.P e consumption/ less/consumption. Chapter 18: Alternative Perspectives on Stabilization PolicyQuestion: Which of the following is an example of a fiscal policy that has no inside lag?a.an increase in government spending for job trainingO b.a decrease in income tax ratesO reducing inflationa reduction in the age at which people become eligible for retirement benefitsOe.an ongoing unemployment insurance program

Chapter 16: Understanding Consumer Behavior Question: The consumer's budget constraint reflects the fact that because interest is earned on savings future ... is worth ..... than current ww. ..... O a. income / less / income. b. consumption /more /income. c. consumption / more / consumption. O d income / more / income. P E consumption/ less / consumption.

Chapter 16: Understanding Consumer Behavior Question: The consumer's budget constraint reflects the fact that because interest is earned on savings future ... is worth ..... than current ww. ..... O a. income / less / income. b. consumption /more /income. c. consumption / more / consumption. O d income / more / income. P E consumption/ less / consumption.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Course: Microeconomics - Intertemporal Consumption Decisions Consider a person who consumes in the 2 periods (C1 and C2), but ONLY works and earns an income in the first period (C1). Assume that consumption in each period behaves as a normal good.a) What is the effect of a rise in income on welfare? And on consumption in both periods? GRAPHb) What is the effect of a rise in the interest rate (assume that r goes from 10% to 15%) that occurs before the consumption decisions on welfare? GRAPH and on consumption in both periods?) GRAPH
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Suppose that one day your rich aunt unexpectedly gives you $10,000 to use as you like, no strings attached. A fraction of that gift will be consumed (the marginal propensity to consume, MPC) or saved (the marginal propensity to save, MPS). If you are like the "average American," you will save less than 5% of your $10,0002. The money you don't save is consumed and is spent on purchasing goods and services. So, whether you spend the increased income on food, entertainment, paying off loans, or a new bicycle, that money goes back into the economy, where it generates revenue through taxes, and gets spent again. This is because an injection of extra income leads to more spending, which creates more income, and so on. In this way, your money is actually spent many times and it has the effect of stimulating the economy through what is known as the multiplier effect. Gifts from rich aunts are not the only way to stimulate the economy. Governments occasionally provide an economic stimulus by…
Because of scarcity, people are more likely to do what? squander resources increase the profit margin use resources wisely The MOST important factor affecting consumer spending is O the level of current consumer debt O the amount of assets held by consumers such as homes, cars, stocks, or bonds the expectations of consumers of what the economy will be in the future © the level of current consumer income
1. TRUE / FALSE : Household decisions depend on the real values for wages and rent rather than the nominal values for wages and rent. On the Source of funds side of the household budget constraint what 2 sources can a household get their their income from 2. 3.
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3. Consider a society of identical individuals who live for two periods. They have the following utility: In co + 3 5 In ci Each individual earns $600 when young, in period 0, and no income in period 1, when old. They can borrow and lend at interest rate r, and the price of consumption is 1. (a) Write down this individual's lifetime budget constraint (b) Solve for this individual's consumption in period, and savings, as a function of r. (c) Suppose now that there is a Social Security program. The gov- ernment collects $ 60 from this individual in period 0, and gives it back with interest r in period 1. i. What kind of social security system is this? ii. What is the new amount of savings? iii. What is the impact of this program on the individual's wel- fare? (d) Suppose some individuals have utility 1 In co +In c₁ 9 The social security system still forces them to save $60. i. If they are still free to borrow and lend at r, what will their optimal choice of consumption and savings be,…
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