Jack and Jill both obey the two-period Fisher model of consumption. Jack earns $100 in the first period and $100 in the second period. Jill earns nothing in the first period and $210 in the second period. Both can borrow or lend at the interest rate r. a. You observe both Jack and Jill consuming $100 in the first period and $100 in the second period. What is the interest rate r?
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- Jack and Jill both obey the two-period Fisher model of consumption. Jack earns $100 in the first period and $100 in the second period. Jill earns nothing in the first period and $210 in the second period. Both can borrow or lend at the interest rate r.
a. You observe both Jack and Jill consuming $100 in the first period and $100 in the second period. What is the interest rate r?
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- Jack and Jill both obey the two-period Fisher model of consumption. Jack earns $100 in the first period and $100 in the second period. Jill earns nothing in the first period and $210 in the second period. Both can borrow or lend at the interest rate r. a. You observe both Jack and Jill consuming $100 in the first period and $100 in the second period. What is the interest rate r? b. Suppose the interest rate increases. What will happen to Jack’s consumption in the first period? Is Jack better off or worse off than before the interest rate rose?Consider the 2-period household model that you have seen in class. Suppose the household wants to consume equal amounts in both periods. She earns $100 in the first period and $150 in the second period. The interest rate depends on whether she saves or borrows. The interest rate on saving is 1%, while the interest rate on borrowing is 10%. What is her optimal consumption? Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it and you should not do anything about it.Jack and Jill both obey the two-period Fisher model of consumption. Jack earns $200 in the first period and $200 in the second period. Jill earns nothing in the first period and $410 in the second period. Both of them can borrow or lend at the interest rate r. a. You observe both Jack and Jill consuming $200 in the first period and $200 in the second period. What is the interest rate r? b. Suppose the interest rate increases. What will happen to Jack’s consumption in the first period? Is Jack better off or worse off than before the interest rate rise? c. What will happen to Jill’s consumption in the first period when the interest rate increases? Is Jill better off or worse off than before the interest rate increase?
- Nick and Steve both obey the two-period Fisher model of consumption. Nick earns $300 in the first period and $300 in the second period. Steve earns nothing in the first period and $620 in the second period. Both of them can borrow or lend at the interest rate r. Nick and Steve both consume $200 in the first period and $200 in the second period. What is the interest rate r?Suppose the household wants to consume equal amounts in two periods. She earns $100 in the first period and $150 in the second period. The interest rate depends on whether she saves or borrows. The interest rate on saving is 1%, while the interest rate on borrowing is 10%. What is her optimal consumption? Be sure to explain why you choose to save or borrow.12. Savings decisions Kevin is a postdoctoral fellow who teaches astrophysics at a university where he earns an annual salary of $80,000. He intends to take the next year off to focus on writing a new undergraduate physics textbook, so he will not earn any income next year. He is currently deciding how much of this year's salary he should save for next year. Assume that there are no tax implications associated with the decision, and ignore what happens after next year. Therefore, next year Kevin will consume whatever he saves this year plus interest, and he is not concerned with the future beyond next year. The following graph shows Kevin's preferences for consumption this year and next year. Suppose initially Kevin cannot earn interest on the money he saves. Use the green line (triangle symbol) to plot Kevin's budget constraint (BC) on the following graph. Then use the black point (plus symbol) to show his optimum consumption bundle. Note: Dashed drop lines will automatically extend…
- Using Fisher's Intertemporal Choice model, consider the following scenario: 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? 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?Consider the household model that you have seen in class but now assume that the goal of the household is to consume twice as much in period 2 as in period 1. She earns $100 in the first period and $150 in the second period. The interest rate is 5%. What is her optimal saving in the first period? Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it and you should not do anything about it.Consider two savings accounts that pay the same interest rate. One account lets you take your money out on demand. The second requires that you give 30-day advance notification before withdrawals. Which account would you prefer? Why? Can you imagine a person who might make the opposite choice? What do these choices say about the theory of the consumption function?
- 1) Sandeep consumes (c1, c2) and earns (m1, m2) in periods 1 and 2 respectively. Suppose that the interest rate is r. a) Write down Sandeep's intertemporal budget constraint in present value terms. b) If Sandeep does not consume anything in period 1, what is the most he can consume in period 2?Kenji is buying salad and pizza for a company lunch. Suppose that a bowl of salad costs $3.00, and a slice of pizza costs $4.00. Let E be the amount in dollars that Kenji spends on salad and pizza. If Kenji buys S bowls of salad and P slices of pizza, then the total amount of money he spends (E) can be represented by the equation Now rearrange the equation you wrote above so that P is written in terms of E and S. The quantity of pizza he buys can be represented by the equation Suppose Kenji has $48.00 to spend on salad and pizza; that is, E= $48.00. Complete the following table with the values of S or P that make the equation true. Hint: To complete the first row, determine the number of pizza slices Kenji can purchase with $48.00, when the number of salad bowls he purchases is 0. Pizza Budget Salad (Dollars) (Bowls) (Slices) 48.00 0 48.00 48.00 8 0Economics 10). Tyler has income of m1=10, this year and an income of m2=10,00 next year. Initially, when the interest rate is r=0, his budget constraint has a vertical intercept at (0, 20000) and a horizontal intercept at (20000, 0). If the interest rate were to increase to r=0.05, what is the only point that the old budget line and new budget line would share? a) (0,20000) b) (10000,10000) c) (20000,0) d) (20000,20000) e) (10500,10500)