1.according to the simplified life-cycle theory of consumption, a retired person with zero income from labor would

A expect to be financially supported by her/his children

B consumer more than during her working years since she does not expect to live much longer

C consume a fraction of accumulated wealth based upon her life expectancy D have to decrease consumption sharply to not run out of funds too soon

E only consume the interest on accumulated wealth

2.If uncertainty about future income and future needs is incorporated into the life-cycle theory of consumption, then

A the fact that saving is interest sensitive can be explained

B the fact that consuming is interest sensitive can be explained

C the fact that people rarely use up their lifetime saving can be explained

3.the proposition that financial debt by issuing bonds merely postpones taxation and is therefore in many instances equivalent to current taxation is knows as

A balanced budget theorem

B reagan theory of taxation C ricardo equivalence proposition Drational expectations proposition

4. The ricardo equivalence proposition implies that tac cuts

A provide important incentives for economic growth

B always lead to a reduction in the budget deficit

C that lead to higher budget deficit do not stimulate consumption since people will save in anticipation of future tax increases

D ease people's liquidity constraints and encourage them to consume more

E always lead to the crowding out of investment spending

5.If you are age 20, have no accumulated wealth, and have an expected average annual income of $36,000, how much should you consume each year if you want to retire at age 65 and expect to live until age 80? You desire to leave no estate and to consume an equal amount in each of the next 60 years.

A) $36,000

B) $31,000

C) $27,000

D) $22,000

E) $20,000