Suppose we are in a society where the social rate of time preference is 5% per year. The discount rate of utility is 3.5% per year, and the elasticity of marginal utility of consumption is 1.25. A. What is the assumed growth rate of future consumption under this scenario? B. Now assume the social rate of time preference changes to 10% while all else stays the same. What is the assumed new growth rate of future consumption? C. What does a SRTP of 5% mean compared to a SRTP of 10%? D. Why does the growth rate of future consumption change from one scenario to the other?
Suppose we are in a society where the social rate of time preference is 5% per year. The discount rate of utility is 3.5% per year, and the elasticity of marginal utility of consumption is 1.25. A. What is the assumed growth rate of future consumption under this scenario? B. Now assume the social rate of time preference changes to 10% while all else stays the same. What is the assumed new growth rate of future consumption? C. What does a SRTP of 5% mean compared to a SRTP of 10%? D. Why does the growth rate of future consumption change from one scenario to the other?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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3. Suppose we are in a society where the social rate of time preference is 5% per year. The discount rate of utility is 3.5% per year, and the elasticity of
A. What is the assumed growth rate of future consumption under this scenario?
B. Now assume the social rate of time preference changes to 10% while all else stays the same. What is the assumed new growth rate of future consumption?
C. What does a SRTP of 5% mean compared to a SRTP of 10%?
D. Why does the growth rate of future consumption change from one scenario to the other?
( If you Answer allow the above I will upvot definitely . ) Thank you
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