Question
A consumer's income in the current period is y= 100, and income in the future period is y'= 170 . He or she pays lump-sum
A consumer's income in the current period is y= 100, and income in the future period is y'= 170 . He or she pays lump-sum taxes t=40 in the current period and t'=20 in the future period. The real interest rate is 0.15, or 15 %, per period.
a. Determine the consumer's lifetime wealth___
(Round to two decimal places as needed.)
b. Suppose that current and future consumption are perfect complements for the consumer and that he or she always wants to have equal consumption in the current and future periods. Describe the consumer's indifference curves.
c. Determine what the consumer's optimal current-period ___and future-period consumption are____ and what optimal saving is____. Is the consumer a lender or borrower?____
(Round to two decimal places as needed.)
d. Now suppose that instead of y = 100, the consumer has y = 140. Again, determine optimal consumption in the current___ and future periods___ and optimal saving___. Is the consumer a lender or a borrower?
(Round to two decimal places as needed.)
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