Mary will earn $42,544 this year and $21,839 next year. The real interest rate is 15% between this year and next year; she can borrow or lend at this rate. She has no wealth at the start of this year and plans to finish next year having consumed everything she possibly can. She would like to consume the same amount this year as next year. The inflation rate is 0%. How much should Mary save?

Mary will earn $42,544 this year and $21,839 next year. The real interest rate is 15% between this year and next year; she can borrow or lend at this rate. She has no wealth at the start of this year and plans to finish next year having consumed everything she possibly can. She would like to consume the same amount this year as next year. The inflation rate is 0%. How much should Mary save?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Mary will earn $42,544 this year and $21,839
next year. The real interest rate is 15%
between this year and next year; she can
borrow or lend at this rate. She has no wealth
at the start of this year and plans to finish next
year having consumed everything she
possibly can. She would like to consume the
same amount this year as next year. The
inflation rate is 0%. How much should Mary
save?

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