1. Suppose you earn just as much as your neighbor but are in much better health and expect to live longer than she does. Would you consume more or less than she does? Why? Derive your answer using the equation from the text, C= (WL/NL) x YL.
2. According to the life-cycle hypothesis, what would be the effect of the social security system on your average propensity to consume out of (disposable) income? Is the credibility of the social security system an issue here? (These are parts a & b of the same question, so they're related.)