Original feasible frontier when individual hasa job during months 1-6 and months 7-12ВYIC,IC2New feasible frontier when individual losesher job in months 7-12 and collectsunemployment benefits in months 7-12Y XAConsumption, Income now (inmonths 1-6)What is the value of Y on the graph? What is thevalue of D on the graph? What would have beenthe value of consumption now and consumptionlater if the individual was NOT able to collectunemployment benefits while being unemployedduring months 7-12?Consumption, Income later (inmonths 7-12) During the Great Recession of 2008,unemployment reached its highest point in the USat 10.6%. In 2009, the Obama Administrationextended unemployment benefits to individualswho lost their jobs. For the following question,consider two time periods: months 1-6 in 2009and months 7-12 in 2009. Define months 1-6 as“now" and months 7-12 as "later" in the two timeperiod model learned in the course. Suppose thatthe interest rate is 4%, that the individual prefers toperfectly smooth consumption between timeperiods, and that the individual enters 2009 with$3000 in cash that she plans to spend in months1-6 and/or months 7-12.Suppose that the individual works and earns ayearly salary of $50,000. She has a job duringmonths 1-6 of 2009, but her job is terminated atthe end of month 6. Suppose that the individualremains unemployed during months 7-12 but sheis able to receive six months of unemploymentbenefits in months 7-12. The unemploymentbenefits give a total of $500 per week for 26weeks. The figure below denotes what happens tothe individual's feasible frontier as a result of theindividual losing her job at the end of month 6 andthen collecting unemployment benefits in months7-12.

The study of intertemporal choices studies decision making between the current period as well as…

Original feasible frontier when individual has a job during months 1-6 and months 7-12 IC, IC, New feasible frontier when individual loses her job in months 7-12 and collects unemployment benefits in months 7-12 Y X A Consumption, Income now (in months 1-6) What is the value of Y on the graph? What is the value of D on the graph? What would have been the value of consumption now and consumption later if the individual was NOT able to collect unemployment benefits while being unemployed during months 7-12? Consumption, Income later (in months 7-12)

Original feasible frontier when individual has a job during months 1-6 and months 7-12 IC, IC, New feasible frontier when individual loses her job in months 7-12 and collects unemployment benefits in months 7-12 Y X A Consumption, Income now (in months 1-6) What is the value of Y on the graph? What is the value of D on the graph? What would have been the value of consumption now and consumption later if the individual was NOT able to collect unemployment benefits while being unemployed during months 7-12? Consumption, Income later (in months 7-12)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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