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Consider the two-period consumption-savings model from class. The consumer has logarithmic utility u(c)=ln(c)u(c)=ln(c), the real interest rate is R=0.05R=0.05, and the consumer's time preference is
Consider the two-period consumption-savings model from class. The consumer has logarithmic utility u(c)=ln(c)u(c)=ln(c), the real interest rate is R=0.05R=0.05, and the consumer's time preference is =1=1. There are no constraints on borrowing or saving.
Due to a temporary job loss, the consumer's current income is y1=30y1=30 while future income is y2=55.y2=55.
Now assume the government pays the consumer 10 in stimulus money. What is the marginal propensity to consume out of the stimulus payment?
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