Question
A consumer is making saving plans for this year and next.She knows that her real income after taxes will be $60.000 in both years.Any part
A consumer is making saving plans for this year and next.She knows that her real income after taxes will be $60.000 in both years.Any part of her income saved this year will earn a real interest rate of 10% between this year and next year.Currently,the consumer has no wealthno money in the bank or other financial assets,and no debts).There is no uncertainty about the future. The consumer wants to save an amount this year that will allow her to (1) make college tuition payments next year equal to $16,800 in real terms;(2) enjoy exactly the same amount of consumptior this vear and next year, not counting tuition payments as part of next year's consumption;and (3) have neither assets nor debts at the end of next year
1. This year the consumer should consume $_____.(Round your answer to the nearest dollar.) 2. The consumer should save $_____.(Round your answer to the nearest dollar.) How are the amounts that the consumer should save affected by each of the following changes (taken one at a time, with other variables held at their original values)? 3. If her current income rises from $60,000 to $66,000,sd=$_____.(Round your answer to the nearest dollar.) 4. If the income she expects to receive next year rises from $60,000 to $66,000,sd=$_____.(Round your answer to the nearest dollar.) 5. lf during the current year she receives an inheritance of $1050 (an increase in wealth, not income), sd=$_____.(Round your answer to the nearest dollar.) 6. If the expected tuition payment for next year rises from $16,800 to $21,000 in real terms,sd=$_____.(Round your answer to the nearest dollar.) 7. lf the real interest rate rises from 10% to 12%,sd=$_____.(Round your answer to the nearest dollar.)
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