Question: According to the permanent-income hypothesis, how does your consumption change in each of the following scenarios? (The first question is answered for you.) To keep

According to the permanent-income hypothesis, how does your consumption change in each of the following scenarios? (The first question is answered for you.) To keep things simple, suppose the interest rate is 10% and you will live forever. Feel free to give answers that involve approximations.
(a) To balance its budget, the government levies a onetime tax this year that costs you $10,000.
(b) You win a lottery, which pays you a onetime amount of $10 million today.
(c) You win a different lottery, which pays you a onetime amount of $10 million, but the payment is made 5 years from now.

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a Ill cut my consumer spending by 1000 each year forever 10000 010 1000 But how do I do that in real ... View full answer

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