Households live in a two-period endowment economy. They earn endowment income, con- sume and save during...

 

 

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Households live in a two-period endowment economy. They earn endowment income, con- sume and save during young age. Now, we assume households are myopic in the sense that their true discount factor is ß but they use a myopic discount factor "B<3 when making de- decisions. Therefore, the households' actual decisions (under myopia "B) are different from the desirable decisions under ß. A marginal cost of saving is a marginal utility from (1) they give up for saving. A marginal benefit of saving is a marginal utility from their benefit from saving at a young age. desirable level. Choose (2) using saving. Based on this information, we can see that the myopic view using "B<ß leads households to (3)_ The results cause that the actual saving and future consumption are (4)_ desirable level and the actual current consumption is (5) the best description for each blank to complete the right explanation. (1)(a) the future consumption /(b) the current consumption (2)(a) the future consumption /(b) the current consumption (3)(a) overestimate /(b) underestimate /(c) estimate correctly (4)(a) larger than /(b) smaller than /(c) equal to (5)(a) larger than /(b) smaller than /(c) equal to (6)write down the household's trade-off condition in a two-period endowment economy. Households live in a two-period endowment economy. They earn endowment income, con- sume and save during young age. Now, we assume households are myopic in the sense that their true discount factor is ß but they use a myopic discount factor "B<3 when making de- decisions. Therefore, the households' actual decisions (under myopia "B) are different from the desirable decisions under ß. A marginal cost of saving is a marginal utility from (1) they give up for saving. A marginal benefit of saving is a marginal utility from their benefit from saving at a young age. desirable level. Choose (2) using saving. Based on this information, we can see that the myopic view using "B<ß leads households to (3)_ The results cause that the actual saving and future consumption are (4)_ desirable level and the actual current consumption is (5) the best description for each blank to complete the right explanation. (1)(a) the future consumption /(b) the current consumption (2)(a) the future consumption /(b) the current consumption (3)(a) overestimate /(b) underestimate /(c) estimate correctly (4)(a) larger than /(b) smaller than /(c) equal to (5)(a) larger than /(b) smaller than /(c) equal to (6)write down the household's trade-off condition in a two-period endowment economy.