Suppose that permanent income is calculated as the average of income over the past five years – that is YP = (Y + Y-1 + Y-2 + Y-3 + Y-4 Suppose further that consumption is given by C = 0.9YP a. If you have earned $20000 per year for the past 10 years. What is your permanent income? b. Suppose that next year (period t + 1) you earn $30000. What is your new YP? c. What is your consumption this year and next year? d. What is your short run MPC and long run MPC? e. Assuming you continue to earn $30000 starting in period t + 1, graph the value of your permanent income in each period using the initial YP equation provided above.
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- Suppose that you eam $250 in year 1 and will ean $448 in year 2. If you borrow money against your future income you will have and additional $400 to spend in year 1, and If you lend all of your current income you will have and additional $280 to spend in year 2. In both years you consume only food which costs $1 per kilogram in each year. What is the interest rate that you borrow and lend at? R= F2 where F is the amount of food consumed this F1 Let your MRS for food in year 1 with food in year 2 be given by the formula year and Fo is the amount of food consumed next year. Calculate your consumption bundie: F1 = F2 = %3! Suppose the interest rate at which you can borrow and lend changes to 40%. Calculate your new consumption bundle: %3D Which interest rate is preferred? O The initial interest rate found in part 1 The new interest rate, 40%Brian lives in San Diego and runs a business that sells guitars. In an average year, he receives $733,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $433,000; he also pays wages and utility bills totaling $257,000. He ovwns his showroom; if he chooses to rent it out, he vill receive $13,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Brian does not operate this guitar business, he can vork as a paralegal, receive an annual salary of $23,000 vith no additional monetary costs, and rent out his showroom at the $13,000 per year rate. No other costs are incurred in running this guitar business. Identify each of Brian's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The vholesale cost for the guitars that Brian pays the manufacturer The salary Brian could earn if he worked as a paralegal The vages and utility…Q.3.4 Year (Base year) 2018 2019 2020 2021 Cost of a basket (R) of consumer goods/services Explain, with the aid of an equation, the components of the consumption function. 1850 2190 2380 2560
- Sally will eam S33,000 this year and $42,000 next year. The real interest rate is 25% between this year and next year; she can borrow or save at this rate. She has no wealth at the start of this year and plans to finish next year having consumed everything she possibly can. She would like to consume the same amount this year as next year. How much should Sally save (or borrow) this year? save $4500 O save $4000 O borrow $4500 O borrow $4000Mr. Karim is planning to pursue MBA studies. Initial inquiry shows that he will have topay RM 24,000 as a tuition fee, buy books for RM 1,000, and pay for transport RM 1,000.The MBA study program will extend over 18 months. Mr. Karim is working now with asalary of RM 3,000 per month. Being a full-time student, he will have to forego the incomefrom his present job for the period of study.is based on the notion that a dollar paid in the future is less valuable than a dollar paid today. The present value of a loan in which $1000 is to be paid out a year from today with the interest rate equal to 1% is $. (Round your response to the neareast two decimal place) If a loan is paid after two years, and the amount $1000 is to be paid then with a corresponding 2% interest rate, the present value of the loan is $. (Round your response to the neareast two decimal place) Next 11:41 AM
- 1- In year 12 Adam earns $1450 and saves $550. In year 21 Adam gets a $4550 raise so that he earns a total of $6000. Out of that $6000, he saves $650. What is Adam's MPC out of his $4550 raise?The following graph shows the decreasing value of a car over time. (a) Write a sentence that explains the meaning of the ordered pair (4, 9100). After? years the car has a value of $? (b) Find the average rate of change (in dollars per year) of car value for the given points. $? per year.Suppose that you are considering an investment, which would require you to pay $1,000 up front (today), and you would receive a payment of $100 per year, for 5 years, beginning one year from now. One year after your fifth payment, you would then have $800 paid to you as a final payment. Assume that the interest rate is equal to 5%. Round all answers to two decimal places. 5. Calculate the Present Value (PV) of the cost and each of the payments for the investment. Does this investment have a positive or negative present value? Should you make this investment? 6. How much would the initial cost ($1,000) need to change for you to be exactly indifferent about this investment? (i.e. you receive the same return for making this investment as you do for not making this investment?)
- Which of the following is correct? For every additional dollar in Lifetime_value, Incore is expected to increase by $0.042 For every additional dollar in Lifetime_value, Income is expected to decrease by $0.042 For every additional dollar in Income, Lifetime_value is expected to decrease by $0.042 For every additional dollar in Income, Lifetime_value ($) is expected to increase by $0.042Assume Medet decided to buy a car. His friend Aidar has lent him $10,000 USD. Medet and Aidar agree that Aidar should earn a real return of $5 percent per year. Enter your responses rounded to two decimal places. (a). The CPI (times 100) is 100 at the time that Frank makes the loan. It is expected to be $111 in one year and $128 in two years. What nominal rate of interest should Aidar charge Medet? The nominal rate of interest charged should be % in year 1. The nominal rate of interest charged should be % in year 2. (b). Suppose Aidar and Medet are unsure about what the CPI will be in one year. How should Aidar and Medet's annual repayments ensure that he gets an annual $5 percent rate of return? Aidar should charge Medet % more than the inflation rate.Aggregate saving (in billions SA 25 0 -100 -200 S 400 800 900 Y Aggregate income (in billions) d) From the graph above, calculate the MPS for the saving function.