Question
TECHNICAL Suppose that permanent income is calculated as the average of income over the past five years Suppose L1ther that consumption is given by
TECHNICAL Suppose that permanent income is calculated as the average of income over the past five years Suppose L1ther that consumption is given by C 0.9 Y) that is YP a. If you have earned $20000 per year for the past 10 years. What is your permanent income? Suppose that next year (period t + 1) you earn S30000_ What is your new YP? What is your consumption this year and next year? What is your short run NIPC and long nun NIPC? Assuming you continue to earn S30000 starting in period t + 1 : graph the value of your permanent income in each period using the initial equation provided above
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