Macro Module 8 HW

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NEAS	NEAS posted 14 Years Ago #9292 #
Supreme Being Group: Administrators Posts: 4.5K, Visits: 1.6K	Macroeconomics, Module 8: Consumption, Saving, and Investment Homework Assignment: Effects on Consumption (The attached PDF file has better formatting.) A person receives income of $10 an hour. The inflation rate is zero, and the real interest rate is 2% per annum. This person consumes 95% of the income and saves 5%. The person now works 2,000 hours a year. The person can work more or fewer hours. What are the effects on the person’s consumption this year from each of the following? A. The real interest rate rises from 2% to 8% for all maturities. B. Real income increases permanently to $12.50 an hour. C. Real income increases to $12.50 an hour this year, but not for future years. D. The person receives an inheritance from a long-forgotten great uncle of $5,000. To answer Part A of this homework assignment, assume the person’s value of current vs future income doesn’t change. The real interest rate changes because other items change in the economy. The person’s desire to save has not changed, but the present value of the future savings changes. For Parts B, C, and D, explain A. The substitution effect on the hours worked. For Part C, note the intertemporal substitution effect. B. The income effect on the hours worked (especially for Part D). C. The effects on the marginal propensity to consume. The inheritance in Part D is the same as the extra income this year if the person works the same hours. For which scenario B, C, or D does the person’s work effort this year rise the most and for which scenario does it rise the least? For which scenario B, C, or D does the person’s consumption this year rise the most and for which scenario does it rise the least? Attachments Macro Mod 8 HW.pdf (1.5K views, 33.00 KB) 0
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Fidicor	F Fidicor posted 7 Years Ago #15710 #
F Forum Newbie Group: Awaiting Activation Posts: 1, Visits: 55	Is this assignment looking for a quantitative or qualitative solution (e.g. should the numbers provided be used in calculations and updated %consumption/$savings be used)? If it is quantitative, should we be using the lifetime-horizon models for this individual (e.g. 17.12) ‌ 1-year/2-year variants don't seem to make sense even if we're only evaluating consumption within a single year, as some of these effects have lifetime impacts ‌‌Also, the ability to ‌more or fewer hours seems to be inconsistent with the assumption that labor is fixed utilized in this chapter (although the ability to work more or less hours is a change along the labor supply curve, I believe, not a change of the labor supply curve). I can't determine what the appropriate matching demand curve would be in this view, and if these effects would change it? ‌ ‌D‌on't a lot of the user decisions around if he wants to work more or less this (or any) year depend on how much he values his free time? How do we incorporate this? For instance, for D, the user could either decide that the extra $5000 gives him the ability to consume more (presumably spread over lifetime) or he could decide he doesn't have to work as much for the same consumption (again spread over lifetime). I‌f possible, could I submit my attempt at answer to this assignment as proof I worked on this homework and receive a correct answer back on this homework to make sure I understand the concepts of this chapter (before the exam date)? Edited 6 Years Ago by NEAS 0
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NEAS	NEAS posted 7 Years Ago #15716 #
Supreme Being Group: Administrators Posts: 4.5K, Visits: 1.6K	+x Fidicor - 5/21/2017 2:55:05 PM This assignment is confusing me a lot. Is it looking for a quantitative or qualitative solution (e.g. should the numbers provided be used in calculations and updated %consumption/$savings be used)? If it is quantitative, should we be using the lifetime-horizon models for this individual (e.g. 17.12) ‌ 1-year/2-year variants don't seem to make sense even if we're only evaluating consumption within a single year, as some of these effects have lifetime impacts ‌‌Also, the ability to ‌more or fewer hours seems to be inconsistent with the assumption that labor is fixed utilized in this chapter (although the ability to work more or less hours is a change along the labor supply curve, I believe, not a change of the labor supply curve). I can't determine what the appropriate matching demand curve would be in this view, and if these effects would change it? ‌ ‌D‌on't a lot of the user decisions around if he wants to work more or less this (or any) year depend on how much he values his free time? How do we incorporate this? For instance, for D, the user could either decide that the extra $5000 gives him the ability to consume more (presumably spread over lifetime) or he could decide he doesn't have to work as much for the same consumption (again spread over lifetime). I‌f possible, could I submit my attempt at answer to this assignment as proof I worked on this homework and receive a correct answer back on this homework to make sure I understand the concepts of this chapter (before the exam date)? NEAS: The homework assignment seeks a qualitative answer. Your comments are what the homework assignment wants: just explain each item. 0
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NEAS	NEAS posted 6 Years Ago #16041 #
Supreme Being Group: Administrators Posts: 4.5K, Visits: 1.6K	+x NEAS - 8/19/2017 6:20:15 PM +x Fidicor - 5/21/2017 2:55:05 PM This assignment is confusing me a lot. Is it looking for a quantitative or qualitative solution (e.g. should the numbers provided be used in calculations and updated %consumption/$savings be used)? If it is quantitative, should we be using the lifetime-horizon models for this individual (e.g. 17.12) ‌ 1-year/2-year variants don't seem to make sense even if we're only evaluating consumption within a single year, as some of these effects have lifetime impacts ‌‌Also, the ability to ‌more or fewer hours seems to be inconsistent with the assumption that labor is fixed utilized in this chapter (although the ability to work more or less hours is a change along the labor supply curve, I believe, not a change of the labor supply curve). I can't determine what the appropriate matching demand curve would be in this view, and if these effects would change it? ‌ ‌D‌on't a lot of the user decisions around if he wants to work more or less this (or any) year depend on how much he values his free time? How do we incorporate this? For instance, for D, the user could either decide that the extra $5000 gives him the ability to consume more (presumably spread over lifetime) or he could decide he doesn't have to work as much for the same consumption (again spread over lifetime). I‌f possible, could I submit my attempt at answer to this assignment as proof I worked on this homework and receive a correct answer back on this homework to make sure I understand the concepts of this chapter (before the exam date)? NEAS: The homework assignment seeks a qualitative answer. Your comments are what the homework assignment wants: just explain each item. 0
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