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Jamel earns income today (period V), and in retirement (period V). his carling today are Yo=42,000, and he foresees earning Y1=16,000 in retirement. He wants
Jamel earns income today (period V), and in retirement (period V). his carling today are Yo=42,000, and he foresees earning Y1=16,000 in retirement. He wants to be able to consul = $22,000 in retirement, and he faces an interest rate of 5%. a. How much should he consume today, Co? b. Assume the government increase the Social Security retirement rate, which increa Jamel's retirement income Y1=20,000. Assuming Jamel still wants to consume C1=$22,000 in retirement, will his consumption today change? If yes, by how much C. Now suppose the interest rate increases to 10%. What will happen to Jamel's consumption today? i. How will the substitution effect affect his consumption today? ii. How will the income effect affect his consumption today
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