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Consider Karl, an individual investor. Karl is 30 years old, earns after-tax income of $50,000 per year, expects to retire at age 65, and receive after-tax Social Security payments in retirement of $20,000/year. Karl has a current net worth of $50,000 and the after-tax return on investment is 1% per year. He believes he will continue to earn $50,000 per year in real terms over the next 25 years. Assuming Karl believes he may live as long as 100 years, what is the maximum steady rate of consumption that he can maintain while keeping net worth positive through age 100? How does your answer change if the return on investment is 3% per year instead of 1%? How does your answer change if Karl wishes to leave an estate at death of $1,000,000? For each case, what is the “savings rate” defined as (1-Consumption/Income)?
Confronted with an adverse supply shock, an economy with rigid wages and prices would suffer
In the movie Princess Bride, the hero disguised as the pirate Westley is engaged in a game of wits with the villain Vizzini. Westley puts poison in either his own glass of wine or in Vizzini's glass. Construct the payoff matrix for this game. Assume ..
Suppose there are two consumers, A and B, and two goods, X and Y. Consumer A is given an initial endowment of 3 units of good X and 8 units of good Y. Consumer B is given an initial endowment of 3 units of good X and 4 units of good Y. Suppose the..
You make monthly deposits of $340 into an account that pays 3% per year. How much larger would the balance be after 7 years if interest is compounded continuously compared to monthly? Please provide steps.
Illustrate what major legislative actions has congress taken As 1993 to reduce size of Federal deficit. Why process is politically painful to Congress.
q1. identify at least one important entrepreneur that you would consider an entrepreneurial legend and state why you
Consider a simple one-period, closed economy model where the representative consumer has utility function u(C, l) and h available hours to divide between work and leisure. The representative firm has technology given by Y = zF(K, N^d ). Define a Comp..
Explain what will the total decrease in aggregate demand be as a result of the initial $12 billion decrease.
What can you infer from this data about the rate of labor productivity growth in the US economy during this period? If possible give a numerical answer, but in any case explain your answer in a few sentences
The demand curve for a product is estimated to be given by the expression: q = 200 − π Calculate the price and the price elasticity of the demand for the following values of the demand: 0, 50, 100, 150 and 200. Repeat these calculations for the case ..
Your income last year accounts to $77,000.00 tax bracket are as follows :$0 - 20,000 pays 5% Above $20,000 to $50,000 pays 10% above $50,000 pays 15%. How much is your tax at the end of the year using 15% proportional income tax? How much is your tax..
Statistics show China has a huge savings rate and huge trade surpluses. In contrast, the U.S. has very small savings rates and very large trade deficits. What national income accounting can explain this? Discuss and reference equations and/or the cir..
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