Consider the two-period Neoclassical growth model seen in class. Suppose that income is measured in dollars. Let the utility function take the logarithmic form U(C)=In C. Suppose that Y, = $50,000, and Y2 = $30,000, and ß = 1 and R= 5%. B.1 What is the value of lifetime income in terms of dollars today? B.2 Compute the consumption in dollars for period 1 and period 2.

Consider the two-period Neoclassical growth model seen in class. Suppose that income is measured in dollars. Let the utility function take the logarithmic form U(C)=In C. Suppose that Y, = $50,000, and Y2 = $30,000, and ß = 1 and R= 5%. B.1 What is the value of lifetime income in terms of dollars today? B.2 Compute the consumption in dollars for period 1 and period 2.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the two-period Neoclassical growth model seen in class. Let the utility function take the logarithmic form U(C)=In C. A.1 Express the Euler condition under logarithmic utility. A.2 What does the growth rate of consumption depend on under logarithmic utility? Let W denote the total lifetime income in terms of consumption today. A.3. Derive expressions for consumption in period1 and period 2 as a function of W.
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