Assume you define your permanent income as the average of your income from this and the past four years. Your earnings record over these five years has been: Yt = 40,000, Yt-1 = 38,000, Yt-2 = 34,000, Yt-3 = 32,000, Yt-4 = 31,000. If your income increases next year to Yt+1 = 46,000, by how much will your consumption change if you always consume 90 percent of your permanent income?

Suppose the real interest rate is 0%. Daniel worked for 60 years and he retired for 20 years. When Daniel had a job, his annual income was $10,000. During retirement, the annual pension he received was $6,000. Suppose Daniel smoothed consumption completely. What was the amount of savings Daniel had when he retired? O $16,000 O $120,000 $600,000 $60,000

U(C1, C2) = c₁0.8 20.4 where c₁ is the quantity of current consumption goods and c₂ is the quantity of future consumption goods. Consider a consumer whose income is y₁ = 100 in the current period and y₂ = 140 in the future period. The consumer pays lump-sum taxes t₁ and t₂ == = 20 in the current period 10 in the future period. The real interest rate is r = 0.1, or 10%, per period. (a) Write down the consumer's budget constraint for each period and derive the consumer's lifetime budget constraint. What is the value of the consumer's lifetime wealth? [Note: Lifetime wealth is the present value of the consumer's lifetime disposable income] (b) Draw the lifetime budget line on the (C1, C2) plane with c₁ on the horizontal axis and C₂ on the vertical axis. Include the values of the intercepts and the endowment point in your graph. What is the slope of the budget line? (c) What are the two conditions that the consumer's optimal choice of (C1, C2) must satisfy? Find the consumer's optimal…

What is the formula for calculating Net Present Value (NPV)? a) NPV = Total Revenue - Total Costs b) NPV = Total Costs - Total Benefits c) NPV = Initial Investment - Total Revenue d) NPV = Total Benefits - Initial Investment