Q1. Refer to the theories of consumption, give brief answers to the following questions. 1. What is meant by secular stagnation? What led to the failure of this concept? 2. Identify any two similarities and differences between permanent and life cycle income hypothesis? 3. If one is to compare "mpc" out of permanent income and "mpc" out of transitory income, which would be greater in terms of value and why? 4. Suppose you earn same income as one of your cousins but expect to live longer than your cousin, how would your consumption function be different than that of your cousin? Would you consumer more or less than him? 5. Refer to the following intertemporal budget constraint of a respective consumer: Second-period consumption, C Consumer's (1+r)Y, +Y budget constraint Saving Borrowing Y, Y, +Y/(1+r) First-period consumption, C, a. How would this budget constraint change if individual becomes more presented oriented (he discounts future heavily)? b. How would this budget constraint change if individual faces a borrowing constraint in second period? 6. Average propensity to consumer along a linear consumption function is always constant; true or false? Justify your response.

Q1. Refer to the theories of consumption, give brief answers to the following questions. 1. What is meant by secular stagnation? What led to the failure of this concept? 2. Identify any two similarities and differences between permanent and life cycle income hypothesis? 3. If one is to compare "mpc" out of permanent income and "mpc" out of transitory income, which would be greater in terms of value and why? 4. Suppose you earn same income as one of your cousins but expect to live longer than your cousin, how would your consumption function be different than that of your cousin? Would you consumer more or less than him? 5. Refer to the following intertemporal budget constraint of a respective consumer: Second-period consumption, C Consumer's (1+r)Y, +Y budget constraint Saving Borrowing Y, Y, +Y/(1+r) First-period consumption, C, a. How would this budget constraint change if individual becomes more presented oriented (he discounts future heavily)? b. How would this budget constraint change if individual faces a borrowing constraint in second period? 6. Average propensity to consumer along a linear consumption function is always constant; true or false? Justify your response.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Q1. Refer to the theories of consumption, give brief answers to the following questions.1. What is meant by secular stagnation? What led to the failure of this concept?2. Identify any two similarities and differences between permanent and life cycle income hypothesis?3. If one is to compare “???” out of permanent income and “???” out of transitory income, which would be greater in terms of value and why?
1. TRUE / FALSE : Household decisions depend on the real values for wages and rent rather than the nominal values for wages and rent. On the Source of funds side of the household budget constraint what 2 sources can a household get their their income from 2. 3.
a. Discuss the assumptions of the Fisher’s Intertemporal Choice Model b. Using Fisher's Intertemporal Choice model, consider the following scenario:i. Suppose Milo earns $1,750 in the first period and $2,500 in the second period. If he consumes $1,200 in the first period and $1,550 in the second period, what is the interest rate? ii. Now if Milo’s consumption changes to $1,800 in the first period and $2,000 in the second period, what is the new interest rate? c. Graphically depict and explain the Consumer’s optimum in the Fisher’s Intertemporal Choice Model.
1. What relationship does the income expenditure model represent? Why is it used?
Generally, as the proportion of middle-income households in a country __________, the __________ a nation's purchasing power tends to be. A. increases; greater B. increases; less C. decreases; greater D. decreases; less E. There is no relationship at all
3. Suppose that you are interested in answering the question of how consumption reacts to tax increases. In recent years, government has imposed tax increases to fund increased infrastructure spending. If you could design an ideal experiment to answer this question, how would you do so? Do you think it would be practical to use this experiment on a large scale?
Which of the following isn't one of the eight determinates of the level of consumption? A. Disposable Income B. Keeping up with the Joneses C. The Wealth Effect D. Product Quality
1. What is a market-clearing model? When is it appropriate to assume that market clear? 2. Use the model of supply and demand to explain how fall in the price of frozen yogurt would affect the price of ice cream and the quantity of ice cream sold. In your explanation, identify the exogenous and endogenous variables. 3. Consider an economy that produces and consumes hot dogs and hamburgers. In the following table are data for two different years. Goods Hot dogs Hamburgers Quantity (2010) 200 200 Price (2010) $2 $3 Quantity (2020) 250 250 Price (2020) $4 $4 Using 2010 data as the base year Compute the following statistics for each year. Nominal GDP, Real GDP, GDP Deflator, Inflation rate using GDP deflator, CPI, Inflation rate using CPI. (Hint: i) to calculate CPI use base year fixed quantity Hot dogs 200 and Hamburgers 200, ii) To calculate inflation rate, use percentage change in price level between two years.)
Economics: Public Economics Question: 1 Refer to Graph 2. Suppose the TANF program is established. What is the individual’s consumption if they spent all of their time in leisure? Do not include a dollar sign when writing your answer. Guess: 10,000 (with margin: 0) Question: 2 Refer to Graph 2. For every dollar earned by the individual below the cutoff (such that they are eligible for TANF), benefits decrease by how much? Do not include a dollar sign when writing your answer. Guess: 0.5 (with margin: 0) Question 3: Which of the following types of balanced budget requirements (BBRs) are least effective in restricting deficits? a. ex post BBRs b. neither ex ante nor ex post BBRs c. both ex ante and ex post BBRs d. ex ante BBRs Thank you for your help and support Academic Agent!
Course: Microeconomics - Intertemporal Consumption Decisions Consider a person who consumes in the 2 periods (C1 and C2), but ONLY works and earns an income in the first period (C1). Assume that consumption in each period behaves as a normal good.a) What is the effect of a rise in income on welfare? And on consumption in both periods? GRAPHb) What is the effect of a rise in the interest rate (assume that r goes from 10% to 15%) that occurs before the consumption decisions on welfare? GRAPH and on consumption in both periods?) GRAPH
Question 4 Explain how does a decrease in the current income y affect the consumer's consumption-saving decision. In particular, explain: 1) How will current consumption c, future consumption c', and savings s change; 2) Are there any substitution effect or income effect. Make sure you draw two figures, one for the borrowers and one for the lenders.
What does it mean when talking about full income and price when considering the household consumption model?