Question

Consider an individual who lives two periods. He works in both periods and receives a labor...

Consider an individual who lives two periods. He works in both periods and receives a labor income of 200 euros in the first period and 220 euros in the second. The interest rate of the economy is 10%. The consumption in period 1 is c1, and in period 2 it is c2. The price of the consumption good is 1 in both periods. The utility function of this individual is U(c1,c2 )=c11/2c21/2. Suppose there is a proportional tax on labor income of 1/11 (i.e., 9.09091%).

What are the optimal private savings in the first period?

Select one:

a. 18.181

b. 18

c. 9.09

d. None of the other answers is true.

e. 20

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider an individual who lives two periods. He works in both periods and receives a labor...
Consider an individual who lives two periods. He works in both periods and receives a labor income of 200 euros in the first period and 220 euros in the second. The interest rate of the economy is 10%. The consumption in period 1 is c1, and in period 2 it is c2. The price of the consumption good is 1 in both periods. The utility function of this individual is U(c1,c2 )=c11/2c21/2. Suppose there is a proportional tax on labor...
Imagine an individual who lives for two periods. The individual has a given pattern of endowment...
Imagine an individual who lives for two periods. The individual has a given pattern of endowment income (y1 and y2) and faces the positive real interest rate, r. Lifetime utility is given by U(c1, c2)= ln(c1)+β ln(c2) Suppose that the individual faces a proportional consumption tax at the rate Ԏc in each period. (If the individual consumes X in period i then he must pay XԎc to the government in taxes period). Derive the individual's budget constraint and the F.O.C...
Consider the following consumption decision problem. A consumer lives for two periods and receives income of...
Consider the following consumption decision problem. A consumer lives for two periods and receives income of y in each period. She chooses to consume c1 units of a good in period 1 and c2 units of the good in period 2. The price of the good is one. The consumer can borrow or invest at rate r. The consumer’s utility function is: U = ln(c1) + δ ln(c2), where δ > 0. a. Derive the optimal consumption in each period?...
Beta lives for two periods. In period 1, Beta works and earns a total income of...
Beta lives for two periods. In period 1, Beta works and earns a total income of $2, 000. If she consumes $c1 in period 1, then she deposits her savings of 2, 000 − c1 dollars in a bank account that gives her an interest rate of 10% per period. (Notice that Beta is not able to borrow in period 1, so c1 ≤ 2, 000.) In period 2, Beta leads a retired life and receives $110 in social-security income....
Beta lives for two periods. In period 1, Beta works and earns a total income of...
Beta lives for two periods. In period 1, Beta works and earns a total income of $2, 000. If she consumes $c1 in period 1, then she deposits her savings of 2, 000 − c1 dollars in a bank account that gives her an interest rate of 10% per period. (Notice that Beta is not able to borrow in period 1, so c1 ≤ 2, 000.) In period 2, Beta leads a retired life and receives $110 in social-security income....
3. Consider an individual who lives for two periods. His income in the first period is...
3. Consider an individual who lives for two periods. His income in the first period is !Y1 and his income in the second period is Y2. His consumption in the first period is !C1 and his consumption in the second period is C2. He can lend and borrow at zero real interest (!r = 0 ). (a) Write his budget constraint (again, assume !r = 0 ). (b) Assume that the government collects a lump sum tax of !T units...
Flag Consider a two-period small open economy without production and a representative household, which lives for...
Flag Consider a two-period small open economy without production and a representative household, which lives for two periods. It receives endowments in the first period (Q1) and second period (Q2), respectively. The household inherits no wealth and optimally decides how much to consume in the first period (C1) and second period (C2) as well as international bond holdings (B1) in the first period, which pays the interest rate R. Household preferences are given by U(C1; C2) = log(C1)+log(C2). Explain in...
Consider an individual who lives for two periods, earns a nominal income of $1000 in each...
Consider an individual who lives for two periods, earns a nominal income of $1000 in each period, and has zero initial and terminal assets. The nominal interest rate, R, on dollar loans is 15%, and the expected rate of inflation, πe, between the two periods is 10%. Assume that the price level in the first period is 1. A. What is the real value of period 1 income? B. What is the maximum amount of dollars that could be borrowed...
4.5 Susan is certain to live just two periods and receives an income of 10,000 in...
4.5 Susan is certain to live just two periods and receives an income of 10,000 in the first period, and 15,000 in the second. She has no other assets. The real interest rate is 8%. (a) As she begins the first period, what is the present value of her lifetime resources? (b) IF she choose to consume the exact same amount in both periods (c1 = c2), what would be her consumption in the first (and second) period? SHOW YOUR...
i just uploaded another screenshot as a correction for below question 【 4 】 Consider an...
i just uploaded another screenshot as a correction for below question 【 4 】 Consider an individual who lives for two periods. The individual has no initial wealth and earns (exogenous) labor incomes of amounts Y1 and Y2 in the two periods. The individual can borrow and lend at a fixed interest rate r. The individual’s lifetime utility function is given by U = ln C1 +   1   ln C2, where ρ is the rate of time preference. Also consider...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT