PlsAnswer the first three question fully with your own knowledge Consider the following two-period consumption-saving model:Max C (BC2)},C1,C2subject to the following constraintsY1 = C1+S,Y2 = C2 – (1+r)S.1. Solve for the intertemporal budget constraint2. Draw the budget constraint (in a graph) with Y1 = 140, Y2 = 70, and r=0.25. Be sure tolabel the maximum values of C¡ and C2 on the y-axis and x-axis.3. Suppose that ß = 0.8, solve for the optimal values of consumption, C and C5.%3D4. Compare your consumption function for period 1 to a consumption function suggested byJohn Maynard Keynes (the so-called Keynesian consumption function). Are they different?5. When r does down, how does C1 change? Does it increase or decrease? Show this mathe-matically.6. Compute the marginal propensity to consume in period 1. Does this fall in the range sug-gested by Keynes?

An intertemporal budget constraint is a limitation faced by a decision-maker who is making choices…

Solve for the intertemporal budget constraint 2. Draw the budget constraint (in a graph) with Y1 = 140, Y2 = 70, and r = 0.25. Be sure to label the maximum values of C¡ and C2 on the y-axis and x-axis. . Suppose that B =0.8, solve for the optimal values of consumption, C† and C;. 1. Compare your consumption function for period 1 to a consumption function suggested by John Maynard Keynes (the so-called Keynesian consumption function). Are they different? 5. When r does down, how does C, change? Does it increase or decrease? Show this mathe- matically. 5. Compute the marginal propensity to consume in period 1. Does this fall in the range sug-

Solve for the intertemporal budget constraint 2. Draw the budget constraint (in a graph) with Y1 = 140, Y2 = 70, and r = 0.25. Be sure to label the maximum values of C¡ and C2 on the y-axis and x-axis. . Suppose that B =0.8, solve for the optimal values of consumption, C† and C;. 1. Compare your consumption function for period 1 to a consumption function suggested by John Maynard Keynes (the so-called Keynesian consumption function). Are they different? 5. When r does down, how does C, change? Does it increase or decrease? Show this mathe- matically. 5. Compute the marginal propensity to consume in period 1. Does this fall in the range sug-

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

PlsAnswer the first three question fully with your own knowledge

Consider the following two-period consumption-saving model:
Max C (BC2)},
C1,C2
subject to the following constraints
Y1 = C1+S,
Y2 = C2 – (1+r)S.
1. Solve for the intertemporal budget constraint
2. Draw the budget constraint (in a graph) with Y1 = 140, Y2 = 70, and r=0.25. Be sure to
label the maximum values of C¡ and C2 on the y-axis and x-axis.
3. Suppose that ß = 0.8, solve for the optimal values of consumption, C and C5.
%3D
4. Compare your consumption function for period 1 to a consumption function suggested by
John Maynard Keynes (the so-called Keynesian consumption function). Are they different?
5. When r does down, how does C1 change? Does it increase or decrease? Show this mathe-
matically.
6. Compute the marginal propensity to consume in period 1. Does this fall in the range sug-
gested by Keynes?

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Only parts d and e please