When real interest rates rise, consumption will shift: downward if income rises as well downward if there is saving O upward if the substitution effect outweighs the income effect O upward if the income effect outweighs the substitution effect

When real interest rates rise, consumption will shift: downward if income rises as well downward if there is saving O upward if the substitution effect outweighs the income effect O upward if the income effect outweighs the substitution effect

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the real interest rate is 0%. Daniel worked for 60 years and he retired for 20 years. When Daniel had a job, his annual income was $10,000. During retirement, the annual pension he received was $6,000. Suppose Daniel smoothed consumption completely. What was the amount of savings Daniel had when he retired? O $16,000 O $120,000 $600,000 $60,000
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Also calculate monthly budget. Thanks!
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Consider the problem of an individual that has Y dollars to spend on consuming over wo periods. Let c1 denote the amount of consumption that the individual would like co purchase in period 1 and c2 denote the amount of consumption that the individual would like to consume in period 2. The individual begins period 1 with Y dollars and can purchase ci units of the consumption good at a price P and can save any unspent wealth. Use s1 to denote the amount of savings the individual chooses to hold at the end of period 1. Any wealth that is saved earns interest at rate r so that the amount of wealth the ndividual has at his/her disposal to purchase consumption goods in period 2 is (1+r)s1. This principal and interest on savings is used to finance period 2 consumption. Again, for simplicity, we can assume that it costs P2 dollars to buy a unit of the consumption good in period 2.
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Question 19 Given that income is $500 and Px - $20 and Py - $5, what is the market rate of substitution between goods X and Y? O 25 -20 -4 100 Question 20 If the interest rate is 7 percent, $500 received at the end of nine years is worth how much today? s0/10.07) O 500/(1+ 500 O s00/11 +.07,9
Assume that John has RO 21 to spend on Energy drink and Protein bars each month and that both goods must be purchased whole (no fractional units). Energy drink (X) cost RO 3 and Protein bars (Y) cost RO 2 each. John’s preferences for movies and books are summarized by the following information: No. per Month Energy drink No. per Month Protein bars TU MU MU/Px TU MU MU/Py 1 84 1 36 2 156 2 66 3 216 3 90 4 264 4 108 5 300 5 120 6 324 6 126 7 336 7 126 Fill in the figures for marginal utility of X and marginal utility of Y per dollar for both movies and books. Are these preferences consistent with the law of diminishing marginal utility? Explain briefly. Given the budget of RO 21, what quantity of Energy drink (X) and what quantity of Protein bars (Y) will maximize John’s…
The endowment point is the consumption bundle in which OA. households maximize utility. O B. current consumption is equal to future consumption. O C. savings are zero. D. households are indifferent to interest rate changes. O E. permanent income is maximized.
Suppose that you have utility function U(x, y) = x2y2, What happens to the share of income spent on each good (, ) when the 1/2 P.X P,y price of x increases? O a. Share spent on x increases O b. Share spent on y increases O c. Both shares stay the same O d. Both shares decrease O e. Not enough information ge Next page
How many pieces of sushi and how many bagels did Deborah consume before the price change? pieces of sushi and |bagels At the new prices, how much money would it have cost Deborah to by those same quantities (that is, the quantities that she consumed before the price change)? 24 Given that it used to take Deborah's entire $210 to buy those quantities, how big is the income effect caused by the lower price of bagels? %24 %24