Consider an overlapping generations model. Suppose population grows at a 2% rate, and wage grows at a 6% rate. Generation 2 has 500 people, who have an average salary of $30,000, and everyone pays 8% of their income to generation 1. What is the total amount generation 2 pays to generation 1?If generation 3 pays generation 2 the same dollar amount gen-eration 2 paid generation 1, what percentage of their income dothey pay?

The overlapping generations model assumes that new people are born in every period, live for some…

Answered: Consider an overlapping generations…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Consider an overlapping generations model. Suppose population grows at a 2% rate, and wage grows at a 6% rate. Generation 2 has 500 people, who have an average salary of $30,000, and everyone pays 8% of their income to generation 1.

What is the total amount generation 2 pays to generation 1?
If generation 3 pays generation 2 the same dollar amount gen-
eration 2 paid generation 1, what percentage of their income do
they pay?

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