Now suppose Paolo can earn 20% real interest on any money he saves. Use the blue line (circle symbol) to plot his new budget constraint (BC2) on the previous graph. Then use the grey point (star symbol) to plot his optimum consumption bundle at this interest rate. (Hint: To plot BC2, think about how much money Paolo would have next year if he saved his entire income this year.) Using the previous graph, complete the following table by indicating how much Paolo should save of his current income when he cannot earn any interest on his savings and when he can earn 20% interest on his savings. Interest Rate Amount Paolo Saves (Percent) (Dollars) 20 Which of the following statements is a good description of the results of this exercise, as well as its implications for broader consumer behavior? O In this case, Paolo saves more money when interest rates are high. However, consumers with different preferences might save less money when interest rates are high. O In this case, Paolo saves less money when interest rates are high. However, consumers with different preferences might save more money when interest rates are high. All consumers, including Paolo, save more money when interest rates are high, because they get a higher return on that investment. O All consumers, including Paolo, save less money when interest rates are high, because they don't need to save as much money to have the same future income.
Now suppose Paolo can earn 20% real interest on any money he saves. Use the blue line (circle symbol) to plot his new budget constraint (BC2) on the previous graph. Then use the grey point (star symbol) to plot his optimum consumption bundle at this interest rate. (Hint: To plot BC2, think about how much money Paolo would have next year if he saved his entire income this year.) Using the previous graph, complete the following table by indicating how much Paolo should save of his current income when he cannot earn any interest on his savings and when he can earn 20% interest on his savings. Interest Rate Amount Paolo Saves (Percent) (Dollars) 20 Which of the following statements is a good description of the results of this exercise, as well as its implications for broader consumer behavior? O In this case, Paolo saves more money when interest rates are high. However, consumers with different preferences might save less money when interest rates are high. O In this case, Paolo saves less money when interest rates are high. However, consumers with different preferences might save more money when interest rates are high. All consumers, including Paolo, save more money when interest rates are high, because they get a higher return on that investment. O All consumers, including Paolo, save less money when interest rates are high, because they don't need to save as much money to have the same future income.
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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