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Suppose that a person starts working at the age of 22 (7) and plans to work until age 60 (WL) with an annual labor income
Suppose that a person starts working at the age of 22 (7) and plans to work until age 60 (WL) with an annual labor income of 275,000. Suppose further that her lifetime resources only come from her labor income, and that she will die at age 90 (NL). Question 1. What is the marginal propensity to consume out of wealth? (3 pts) Question 2. What is the marginal propensity to consume out of income? (3 pts) Question 3. What is her annual consumption? (5 pts) Question 4. By how much will her annual consumption increase if her income were to rise permanently by 5,000 per year? (6 pts)Suppose that a person starts working at the age of 22 (7) and plans to work until age 60 (WL) with an annual labor income of 275,000. Suppose further that her lifetime resources only come from her labor income, and that she will die at age 90 (NL). Question 1. What is the marginal propensity to consume out of wealth? (3 pts) Question 2. What is the marginal propensity to consume out of income? (3 pts) Question 3. What is her annual consumption? (5 pts) Question 4. By how much will her annual consumption increase if her income were to rise permanently by 5,000 per year? (6 pts)
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