The following set of equations are given for a typical worker in the economy. U =...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The following set of equations are given for a typical worker in the economy. U = 4 C Cf The current income is X = 20,000 The future income is Xf = 30,000 The capital market rate is: 10% a. Find the optimal values of C, Cf and S. Show these on a diagram. (5) b. Find the new value of C, Cf and S when capital market rate increases to 15%, show the change on a new diagram - what can you infer about the size of IE and SE. (5) c. Assume that Ricardian holds, if government increases current taxes by 500, using the value as used in part a recalculate the value of C to show that taxes have no impact on C and draw this on a new diagram. (10) d. How will your diagram change if lending rate is 10% and borrowing rate is 15% - no need to calculate C or S, just the end points of the new constraint and the comparison with original budget constraint. (5) For a large open economy demonstrate the impact on the home country's initial trade surplus position when COVID restrictions stopped capital flows in all economies. The following set of equations are given for a typical worker in the economy. U = 4 C Cf The current income is X = 20,000 The future income is Xf = 30,000 The capital market rate is: 10% a. Find the optimal values of C, Cf and S. Show these on a diagram. (5) b. Find the new value of C, Cf and S when capital market rate increases to 15%, show the change on a new diagram - what can you infer about the size of IE and SE. (5) c. Assume that Ricardian holds, if government increases current taxes by 500, using the value as used in part a recalculate the value of C to show that taxes have no impact on C and draw this on a new diagram. (10) d. How will your diagram change if lending rate is 10% and borrowing rate is 15% - no need to calculate C or S, just the end points of the new constraint and the comparison with original budget constraint. (5) For a large open economy demonstrate the impact on the home country's initial trade surplus position when COVID restrictions stopped capital flows in all economies.
Expert Answer:
Answer rating: 100% (QA)
a To find the optimal values of C Cf and S we need to maximize the workers utility subject to their budget constraint The budget constraint is given by X C S 1 rCf where r is the capital market rate X ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
Students also viewed these accounting questions
-
Following data are given for a direct shear test conducted on dry sand: Specimen dimensions: 63 mm x 63 mm x 25 mm (height) Normal stress: 105 kN/m2 Shear force at failure: 300 N a. Determine the...
-
The Ajax Corporation has the following set of projects available to it: *Note: All projects have equal risk. Ajax can raise funds with the following marginal costs: First $250 million..............
-
The following set of 25 scores was randomly selected from a teachers class list. Let x be the pre-final average and y be the final examination score. (The final examination had a maximum of 75...
-
Determine the x-and y-intercepts on the graph of the equation. Graph the equation. y=-1.5x + 15
-
In the movie contract, which side was the more successful negotiator? Can you think of any terms that either party left out? Are any of the provisions unreasonable?
-
A point source S is a perpendicular distance R away from the center of a circular hole of radius a in an opaque screen. If the distance from S to the periphery of the hole is (R + ), show that...
-
Prove directly that, for each \(t \geq 0\), \[\mathbb{E}\left(e^{-z T(t)} ight)=\int_{0}^{\infty} e^{-z s} f_{T(t)}(s) d s=e^{-t z^{1 / 2}}\] where \((T(t), t \geq 0)\) is the Lvy subordinator.
-
Roadworthy Tire and Rubber Company has capacity to produce 170,000 tires. Roadworthy presently produces and sells 130,000 tires for the North American market at a price of $90 per tire. Roadworthy is...
-
Why do we sometimes record a revenue or expense as a deferred item? Wouldn t it be easier to always record revenue to a revenue account and remove any unearned revenue at year - end?
-
John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111111), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303....
-
Q. A pregnant female was taking indomethacin thrice daily till 35 week of gestation. Which anomaly would be expected in baby if delivered now: a. Patent ductus arteriosus Premature closure of ductus...
-
Besides tobacco, alcohol and sugary drinks, what are 2 things you purchase regularly that the implementation of an excise tax would cause you to stop or decrease the frequency of you purchasing it...
-
Econ Manufacturing is selling in a purely competitive market.Its production output is 200 units, which it sells at 5 dollars each. At this level of production output, total cost is 1100 dollars,...
-
What is true concerniIt was stated in the video that the homicide rate had increased in Chicago by 30 percent in the past year. Where is the most uniform and official place that statistics such as...
-
The business manager at Econ Store finds when she increases the price of Econ Cola from $1.00 to $1.25, the quantity sold decreases from 1000 to 600 liters. What is the price elasticity of demand? Is...
-
How do advances in systems biology and computational modeling facilitate our understanding of the complex interplay between genetic factors, environmental influences, and homeostatic regulation at...
-
The White Dove company, whose year ends 31 December, buys some goods from Ranka of France on 30 September. The invoice value is 40,000 and is due for settlement in equal instalments on 30 November...
-
Prove that the mean heat capacities C P H and C P S are inherently positive, whether T > T 0 or T < T 0 . Explain why they are well defined for T = T 0 .
-
Indicate whether each of the items listed below would be included (I) in or excluded (E) from gross income for the 2012 tax year. ________a. Welfare payments ________b. Commissions ________c. Hobby...
-
Kent Pham, CPA, is a 45-year-old single taxpayer living at 169 Trendie Street, La Jolla, CA 92037. His Social Security number is 865-68-9635. In 2012, Kent's W-2 as the controller of a local...
-
Diego, age 28, married Dolores, age 27, in 2012. Their salaries for the year amounted to $46,479 and they had interest income of $3,500. Diego and Dolores' deductions for adjusted gross income...
-
If investors are holding optimal portfolios, how will the portfolios of a more risk averse and a more risk-tolerant investor differ?
-
Using the data from Table 11.3, what is the covariance between the stocks of Alaska Air and Southwest Airlines? Alaska Southwest Ford General Microsoft HP Air Airlines Motor Kellogg Mills Volatility...
-
According to the managerial entrenchment theory, managers choose capital structures so as to preserve their control of the firm. On the one hand, debt is costly for managers because they risk losing...
Study smarter with the SolutionInn App