Question: Scenario: Consider that a consumer has log utility (i.e., u(c)=ln(c)) and real interest rate is R=0.05 and the consumer's time preference is =1 and that

Scenario: Consider that a consumer has log utility (i.e., u(c)=ln(c)) and real interest rate is R=0.05 and the consumer's time preference is =1 and that it is impossible for the consumer to borrow (i.e., completely restrained). This consumer is temporarily laid off with a current income is y1=30 while future income is y2=55.

Question: The government pays the consumer 10 in stimulus. What is the MPC to consume the stimulus payment?

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