MindTap - Cengage Learning Course Hero X + ng.cengage.com/staticb/ui/evo/index.html? deploymentld=5981411816101690856962438939&eISBN=9780357133576&id=1640676332&snapshotld=3205387& W'153) pe. gv cf51 M Gmail YouTube 9 Maps G News Translate Capstone Project: (.. CENGAGE | MINDTAP Q Search this co me Homework (Ch 21) ses 12. Savings decisions og and Study Tools Alex is a post doctoral fellow who teaches quantum physics at a university where he earns an annual salary of $80,000. He intends to take the next I Options year off to focus on writing a new undergraduate physics textbook, so he will not earn any income next year. He is currently deciding how much of this year's salary he should save for next year. Assume that there are no tax implications associated with the decision, and ignore what happens after next ge Success Tips year. Therefore, next year Alex will consume whatever he saves this year plus interest, and he is not concerned with the future beyond next year. er Success Tips The following graph shows Alex's preferences for consumption this year and next year. Suppose initially Alex cannot earn interest on the money he saves Feedback Use the green line (triangle symbol) to plot Alex's budget constraint (BC1 ) on the following graph. Then use the black point (plus symbol) to show his optimum consumption bundle. Note: Dashed drop lines will automatically extend to both axes. ? 120 A BC, (0% Interest) T YEAR (Thousands of dollars) Initial Optimum (0% Interest) O- 10:2 OLOL ON -CO V TWO ~ ENG 11/23/2 ain off and onCENGAGE MINDTAP Q Search this course Homework (Ch 21) upumum crJumpuon bum Note: Dashed drop lines will automatically extend to both axes. Study Tools (? ons cess Tips 120 110 A ess Tips 100 BC (0% Interest) 90 .+ ack 80 Initial Optimum (0% Interest) O CONSUMPTION NEXT YEAR (Thousands of dollars) BC, (50% Interest) New Optimum (50% Interest) 0 0 10 20 30 40 50 60 70 80 90 100 110 120 CONSUMPTION THIS YEAR (Thousands of dollars) Now suppose Alex can earn 50% real interest on any money he saves.Q Search this course My Home Homework (Ch 21) Courses Use the blue line (circle symbol) to plot his new budget constraint (BC2 ) on the previous graph. Then use the grey point (star symbol) to plot his Catalog and Study Tools optimum consumption bundle at this interest rate. (Hint: To plot BC2, think about how much money Alex would have next year if he saved his entire income this year.) Rental Options College Success Tips Career Success Tips Using the previous graph, complete the following table by indicating how much Alex should save of his current income when he cannot earn any interest on his savings and when he can earn 50% interest on his savings. Help Interest Rate Amount Alex Saves Give Feedback (Percent) (Dollars) 0 50 Which of the following statements is a good description of the results of this exercise, as well as its implications for broader consumer behavior? All consumers, including Alex, save less money when interest rates are high, because they don't need to save as much money to have the same future income. In this case, Alex saves more money when interest rates are high. However, consumers with different preferences might save less money when interest rates are high. All consumers, including Alex, save more money when interest rates are high, because they get a higher return on that investment. O. In this case, Alex saves less money when interest rates are high. However, consumers with different preferences might save more money when interest rates are high