Consider an Overlapping Generationmodel with individuals living for twoperiods, young and old. Each personis endowed with y when young andnothing when old. Assume thatpopulation is growing at a constantrate n. Therefore, N, = N;-1 = nAlso, assume that the money supplygrows at a rate of z> 1. Newly printedmoney is transferred in the form oflump-sum denoted by "a" to old. Whatare the first-and second periodconsumption for an individual?a) C1,t + V¡M¡ < yC2,1+1 + Vi+1m; < a+1O b) C1,1 + VịM¡ < yC2,1+1 < Vi+1M; + atO c) C1,1 + Vịm, < y + ajC2,1+1 < Vi+1M,model with individuals living for twoperiods, young and old . Each personis endowed with y when young andnothing when old. Assume thatpopulation is growing at a constantrate n. Therefore, N, = N,-1 = nAlso, assume that the money supplygrows at a rate of z> 1. Newly printedmoney is transferred in the form oflump-sum denoted by "a" to old. Whatare the first-and second periodconsumption for an individual?O a) C1.1 + Vịm, < yC2,1+1 + Vi+1m; < a+1O b) C1,t + V;m; < yC2,1+1 < Vi+1m; + a;O c) C11 + V;m; < y + ajC2,1+1 < Vi+1m,d) C1,1 + V¡M¡ < yC2,1+1 < Vi+1m; + A+1

Intertemporal Choices refer to consumption models based upon the choices made by consumers to…

Consider an Overlapping Generation model with individuals living for two periods, young and old . Each person is endowed with y when young and nothing when old. Assume that population is growing at a constant rate n. Therefore, N, = N,-1 = n Also, assume that the money supply grows at a rate of z> 1. Newly printed money is transferred in the form of lump-sum denoted by "a" to old. What are the first-and second period consumption for an individual? a) C1,1 + V;M¡ < y C2,1+1 + Vi+1m, < Ai+1 b) C1,1 + V¡M¡ < y C2,1+1 < Vi+1M; + at O c) C1,1 + V;M¡ < y + aj C2,1+1 < Vi+1m; model with indiıviduals living for two periods, young and old . Each person is endowed with y when young and nothing when old. Assume that population is growing at a constant rate n. Therefore, N, = N,-1 = n Also, assume that the money supply grows at a rate of z> 1. Newly printed money is transferred in the form of lump-sum denoted by "a" to old. What are the first-and second period consumption for an individual? a) C1,1 + V;m¡ < y C2,1+1 + V+1m; < a+1 O b) C1,1 + Vịm, < y C2,1+1 < Vi+1M; + a; Oc) C1, + V,m¡ < y + a; C2,1+1 < Vi+1m; O d) C1.1 + Vm¡ < y C2,1+1 < Vi+1m, + a+1

Consider an Overlapping Generation model with individuals living for two periods, young and old . Each person is endowed with y when young and nothing when old. Assume that population is growing at a constant rate n. Therefore, N, = N,-1 = n Also, assume that the money supply grows at a rate of z> 1. Newly printed money is transferred in the form of lump-sum denoted by "a" to old. What are the first-and second period consumption for an individual? a) C1,1 + V;M¡ < y C2,1+1 + Vi+1m, < Ai+1 b) C1,1 + V¡M¡ < y C2,1+1 < Vi+1M; + at O c) C1,1 + V;M¡ < y + aj C2,1+1 < Vi+1m; model with indiıviduals living for two periods, young and old . Each person is endowed with y when young and nothing when old. Assume that population is growing at a constant rate n. Therefore, N, = N,-1 = n Also, assume that the money supply grows at a rate of z> 1. Newly printed money is transferred in the form of lump-sum denoted by "a" to old. What are the first-and second period consumption for an individual? a) C1,1 + V;m¡ < y C2,1+1 + V+1m; < a+1 O b) C1,1 + Vịm, < y C2,1+1 < Vi+1M; + a; Oc) C1, + V,m¡ < y + a; C2,1+1 < Vi+1m; O d) C1.1 + Vm¡ < y C2,1+1 < Vi+1m, + a+1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Md = a1 + a2 Y + a3 R + a4 P + u (1)Ms = B1 + B2 Y + e (2)Md= Ms = M* (3) In this system of equations, Md represents money demand, Ms money supply, Y national income, R interest rate, and P price level. u and e are the random errors. (3) shows the equilibrium condition in money market.a) Show the endogenous and exogenous variables in this system and indicate if regressions (1) and/or (2) are identified. b) Given the system of equations, show how you estimate regression (2) using 2SLS method. Explain.
a) Assume that the nominal return on U.S. government T-bills was 10% during 2002, when the rate of inflation was 6%. The real risk-free rate of return on theseT-bills was: b) When individuals believe they have sufficient income and assets to cover their expenses while maintaining a reserve for uncertainties, they are most likely in the phase of the investment life cycle. gifting B. consolidation C. accumulation D. spending c) Find the duration of a 3-year bond with annual coupon payments of $80 and a par value of $1,000. The current market price of the bond is $950.25. If the YTM of the bond dropped by 1%, what would happen to the bond price?
Consider a household with wealth of $62,000. If the price level decreases by 8%, this household is expected to its consumption because of the decrease; deflationary effect decrease; wealth effect increase; wealth effect decrease; income effect increase; interest rate effect
Consider the production Y = AK3 L2/3 %3! where Y is output, A is TFP, K is the stock of capital, and L is the quantity of labor. The real interest rate R is equal to the marginal productivity of capital. R = A(+) What happens to the real interest rate if the stock of capital is divided by two, keeping population and TFP constant? Does it increase/decrease by a factor or more/less/exactly two? Explain.
2. Suppose that a representative household is part of a two-period economy, with a commodity and a credit market. He holds no initial assets (bonds or money) and no final assets, by the end of the second period. Assume that, for some exogenous reason, the price level decreases at the beginning of period one, before consumption and labor effort decisions are made. This drop is expected to last forever. a) Do you expect this change to yield any real effect? More exactly, are real aggregate output demand (through consumption) or supply (through labor effort) affected? Explain why or why not. b) Imagine now that this household leaves a bequest to the next generation. As a result, a decision is made to hold a fixed real value of bonds (b2/P) by the end of the second period. These will be paid to the children of the household. Under these conditions, will there be any impact from the price level change over the individual consumption and labor effort choices of the representative household…
Assume i=0%, beta=1. Consumer has income of 80 in year 1, 100 in year 2. Now suppose gov't gives consumers a free check of 10 in year 1. Suppose consumers are naive (they don't anticipate the free check is financed by borrowing from China, which needs to be paid back through more tax in period 2), consumer will consume ____ in year 1. Hint: when consumers are naive, they will believe they have 80+10=90 income in period 1, and 100 income in period 2.
Let each consumer have preferences described by the utility function and let the production function be given by y = kα a. Demonstrate that utility maximization results in demands that satisfy b. Using the result in part a, the consumer’s budget constraint and the capital market equilibrium condition, show that the steady-state value of k satisfies c. Employing the factor price condition r = αkα-1, show that the steady-state interest rate is
Suppose the U.S. economy was at trend and now benefits from a boom in Asia, which raises de by 0.015. All other demand parameters remain unchanged. In order to maintain Y₁ = 0, the Federal Reserve raises the real interest rate R by 0.6 percentage point. Based on this information you know that b =
3. Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate (Percent) 7 National Saving (Billions of dollars) 55 Domestic Investment (Billions of dollars) Net Capital Outflow (Billions of dollars) 30 -15 6 50 40 -10 5 45 50 -5 4 40 60 0 3 35 70 5 2 30 80 10 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. Market for Loanable Funds 10 O Demand 8 O Supply *+ Equilibrium 20 40 80 60 QUANTITY OF LOANABLE FUNDS REAL INTEREST…
Kevin's reference dependent utility over money is y and effort is E, refer to the: instantaneous utility function: rt: reference point for wealth, which demonstrated his recent wealth Kevin does not have from money but from gains and losses of money instead. There is no discounting, and assume that Kevin's current wealth from his job is 0. Kevin is thinking about a new role at work which allows him to increase his income by $1000 per period for two periods, counting from the current period, which is t = 0. He must undergo a training which require an effort of EO = 3500 at that value of alpha, how much ultility would Kevin lose relative to his non-projection-biased preferences if she took the position 1000 250 500 750