MACROECONOMICS
10th Edition
ISBN: 9781319106072
Author: Mankiw
Publisher: MAC HIGHER
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Chapter 19, Problem 5QR
To determine
Examples for time inconsistent preferences.
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- Indicate whether the statement is true or false, and justify your answer.Suppose an individual prefers to drink beer during college but enjoys winemore during middle age. This is a classic example of time-inconsistent preferences.arrow_forwardWhy would an economist choose either the neoclassical perspective or the Keynesian perspective, but not both?arrow_forwardFred is planning his consumption over two time periods. Fred's preferences for consumption in period and two can be represented by the following utility function: U(c,,c,) = C +(1+p) C" , where pis the subjective discount rate, and c;,c, is consumption in the first and second period. Fred's income in the first period is y, and grows by g % from the first period to the second period. Fred has access to perfect financial markets. The rate of interest is r>0. (a) Derive Fred's demand functions for consumption in the two periods as functions of p,r , y and g. (b) Derive Fred's demand for borrowing/saving as a function of p,r, y and g. (c) Give a condition involving the relationship between r and g for when Fred will borrow and when he will save.arrow_forward
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