intertemporal choices , Macroeconomics

) Consider an economy where individuals live for 2 periods and have prefer- ences represented by
ln(c) + ß ln(c')
where c and c' represent consumption in the first and second period, respectively. Income is denoted y in the first period and y' in the second. The real interest rate is denoted r.
(a) Whatistheequilibriumrateofinterestonthecreditmarket?Explainhowyou derived it.
(b) In a recession the rate of growth of income decreases, that is y'/y decreases. What does this model predict about the behavior of the interest rate in a re- cession? Why?
Posted Date: 11/28/2012 8:59:32 PM | Location : United States







Related Discussions:- intertemporal choices , Assignment Help, Ask Question on intertemporal choices , Get Answer, Expert's Help, intertemporal choices Discussions

Write discussion on intertemporal choices
Your posts are moderated
Related Questions
equilibrium in money market and derivation of lm curve

Treatment of Na2PdCI4 with 3-chloro-2-methyl-1-propene under an atmosphere of CO yields the dimer [(11 3 - C 4 H 7 )PdClb (A). The 1H NMR spectrum of A at 298 K shows 3 signals: a

Take a position on the following economic issue in the "yes" or "no" selection, support your position with economic theory and critical thinking skills. ISSUE: Should the Feder

C=100+0.75Yd How do i calculate marginal propensity to consume?

Can democracy survive if a majority of the citizenry pays little or nothing in taxes while benefiting directly from a higher level of government spending? Why or why not?

How can we answer in Economic terms this questions: Why should the government consider to increase tax on cigarette

Q1. A company selling widgets advertises through three types of media: print, television and internet. Recently the company has decided to increase its advertising budget by $100,0


According to Bowen, Leamer, and Sveikauskas, which of the following is true? a. A nation indirectly exports its most abundant factors of production. b. A nation indirectly im

ChoppinAxe is a small Swedish firm that produces wood planks and operates in a perfectly competitive market. Every firm in the market has the following total cost function: C(qi