How does the life-cycle and permanent-income hypotheses resolve the seemingly contradictory pieces of evidence regarding consumption behaviour?
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How does the life-cycle and permanent-income hypotheses resolve the seemingly contradictory pieces of evidence regarding consumption behaviour?
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- How do the life-cycle and permanent-income hypotheses resolve the seemingly contradictory pieces of evidence regarding consumption behavior?What does it mean when talking about full income and price when considering the household consumption model?According to the Permanent Income Hypothesis (PIH), what should a consumer do if she receives news that she will be demoted next year (and her salary will be halved)? Draw the paths of income and consumption for this consumer.
- In the set of the IS curve analysis, which of the following is an endogenous variable? Investment quantity Real interest rate Nominal interest rate Money supply quantityaccording to neoclassical theory, what determines wages and the return to capital? How would a Marxist or Institutionalist take issue with such a description of income distribution?Define intermediate goods and give one example of it.
- What does neoclassical theory say about income distribution and inequalitywe use the Fisher model to discuss a change in the interest rate for a consumer who saves some of his first-period income. Suppose, instead, that the consumer is a borrower. How does that alter the analysis? Discuss the income and substitution effects on consumption in both periods.In Irving Fisher’s two period model, if the consumer is initially a saver and the interestrate and the first period consumption increases, then we can conclude that the incomeeffect:a) Was greater than the substitution effectb) Was less than substitution effectc) Exact offset the substitution effectd) And the substitution effect both increased consumption