Question 1

Say Ali defines his permanent income as the average income this year and the past 4 years' incomes. Furthermore he always consume 3/5 of his permanent income. His incomes record over these years has been:

Y_t= 46,000

Y_t-1 = 42,000

Y_t-2 = 36,000

Y_t-3 = 32,000

Y_t-4 = 30,000

If next year his income increases to Y_t+1 = 50,000 by how much will Ali's consumption change between year t and year t+1?

Question 2

Explain the assumption regarding consumers' behavior in the life-cycle-permanent-income hypothesis which needs to be changed in order to explain the presence of precautionary, or buffer-stock saving.

Question 3

Strategy 1: Strengthen the Economic Growth

"Industrial areas that have public facilities or infrastructure maintained systematically among the major factors that support the development of the industry. In this case, the incentive to 100 percent income tax exemption for a period of five years will be provided to encourage the private sector to maintain and improve industrial in less developed areas. Whereas the incentive to 70 percent income tax exemption for a period of five years will be provided to the private sector to manage the industrial in other areas."

Strategy 6: Building an Nation Youth Program Transformation

"This scheme offers the first home ownership are worth not more than 500 thousand ringgit, to youth married couple, aged 25 to 40 years old and have a household income of not more than 10-thousand ringgit. The maximum loan period is 35 years."

"Under this scheme also 200 ringgit per month is given by the government for the first two years to reduce the burden of monthly housing loan installment. Exemption of 50 percent stamp duty on the instrument of transfer and loan agreement are also given."

Discuss the impact of fiscal stimulus on the business fixed investment and residential investment.