O Barnabus' income in period 1 (current) is $50,000. His income in period 2 (future) will be $60,000. If Barnabus saves money, he will be paid 8% interest. If Barnabus borrows money he has to pay 12% interest. At those interest rates Barnabus is neither a borrower nor a lender. Show Barnabus's budget constraint, and the indifference curve passing through his best bundle.
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- Suppose a person lives for 4 periods. His salary during each period of his life is $30, $60, $90 and $0. He was born without any financial wealth. 1. If the interest rate is 8% per period, what is the present value of the income of this agent? 2. If the individual wishes to have a constant consumption during his life, what will it be? Deduct his level of savings during each of the 4 periods of his life. 3. Suppose our individual cannot borrow (but can save). Determine the consumption and savings profile of the individual. 4. Suppose our individual receives an inheritance at birth of $10. How your answer in c) be affected?Refer to the following figure. The equation for this household's saving function is Saving -300 1,000 saving Income7. Mr. C lives for 2 periods, today and tomorrow. He consumes only bananas. He is endowed with 50 bananas today and 50 bananas tomorrow. There is no risk, and he can borrow and lend at the same interest rate, but has no investment opportunities. At the current interest rate he neither borrows or lends. (a) Write and draw his inter-temporal budget constraint and optimum. (b) Will a fall (rise) in the rate of interest make Mr. C better off?
- Brian earns income equal to $82,000 in the first period, but his income will drop to $19,170 in the second period. a. Sketch his intertemporal budget constraint, assuming a 6.5% interest rate. Add an indifference curve that assumes he optimally chooses to save $40,000 in the first period. Be sure to CLEARLY graph your answer, with labels on the axes and any other important points. Also show work for any calculations done. b. Show the effect of a 50% tax on interest income, assuming the substitution and income effects cancel each other out. Again, be sure to clearly graph your answer and show work for any calculations done.Dr.Farida is planning for her requirements. Suppose she can consume her salary of Rs. 100,000 while she is in service or save her salary to consume it after retirement. When she saves her salary she will get 10% interest on it. Draw Dr. Farida's budget constraint, her indifference curve and her optimum. If interest rate goes upto 20%, draw figures to show when she will save more and when she will save less.Dr. Abida is planning for her requirement. Suppose she can consume her salary of Rs. 200,000 while she is in service or save her salary to consume it after retirement. When she saves her salary, she will get 8% interest on it. Draw Dr. Abida’s budget constraint, her indifference curve and her optimum.iv.If interest rate goes up to 15%, draw figures to show when she will save more and when she will save less.
- 3rian earns income equal to $82,000 in the first period, but his income will drop to $19,170 in the second period. a Sketch his intertemporal budget constraint, ansuming a 6.5% interest rate. Add an indifference curve that assumes he optimally chooses to save $40,000 in the first period. Be sure to CLEARLY graph your answer, with labeln on the axes and any other important points. Also show work for any calculations done. b. Show the offect of a 50% tax on interest income, assuming the substitution and income effects cancel each other out. Again, be sure to clearly graph your answer and show work for any calculations done.After grauating with a BBA in Economics, Dwight is considering going to college to get a Ph. D. in Economics. If he does not go to graduate school to get a Ph. D. in Economics, he will be earning $112483 working at Bank of America, and spend $44134 on room and board. If he goes to college to get a Ph. D. in Economics, he will spend $43012 on tuition, $20376 on room and board, and $7550 on books. What are Dwight's full cost of getting a Ph. D. in Economics? Only typing answer Please explain step by step2. Dan lives for only two periods. He earns real income m, in the present and mf in the future. His utility function is U(Cp,C) =6C,2/Cf. The market real interest rate is r. (a) Suppose that Dan initially cannot borrow or save. Using a diagram, illustrate and explain the case where Dan would be better off saving. (b) Now suppose that Dan can borrow and save at the market interest rate : Determine the equations for consumption in both periods and savings that maximize Dan's utility. (c) Now consider the special case where Dan earns m, in the present and is retired in the future so that mf=0. If the interest rate rises, will his present and future consumption increase, decrease, or stay the same? Will the increase in the interest rate make him save more or less? Illustrate this in a diagram. Explain your answer in reference to the income and substi tution effects. (d) Following from (c), suppose instead that Dan is eligible to receive a government pension when he retires. Illustrate and…
- Name the two components of budget in an economy54. a. Write an equation in point-slope form to represent the mileage of the car y after using x gallons of gasoline. b. Graph the equation and interpret its key features in the context of the situation. run Yo Harper opened a savings account with $525. Each month, she deposits an additional $40 into the account. The balance of the account each month can be represented by an arithmetic sequence. a. Write an equation to represent the scenario. c. How many gallons of gasoline will Nya have used when the mile car reaches a mileage of 40,000 miles? Round to the nearest tenth, if necessary. b. After how many months will Harper have saved at least $1000? 55. Kordell opened a savings account with $1200 that earns 14% simple interest. Because simple interest is based on the principal deposit, the interest rate means that he earns $12000.14 = $168 each year. The balance of the account each year can be represented by an arithmetic sequence. a. Write an equation to represent the scenario. 56. b.…This person earns $1000 of income today and $2000 income next year. Point C represents his consumption if he doesn't borrow or lend. Consumption Next Year The interest rate is 10%. Consumption Today Moving from C to A the person is saving money and earning interest. O Moving from A to C, the person is borrowing and paying interest. O Moving from C to B, the person is saving and earning interest. O Moving from C to B, the person is borrowing and paying interest.