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
1. # of sellers, # of buyers 2. entry and exit conditions 3. product characteristics 4. short run P&Q determinations and the resulting 3 possibilities for excess profit (graphs ar

Q. Explain about Interest rate? When you borrow money, you normally have to pay a fee for the loan. This fee is frequently known as interest, especially if the fee is proportio

Application of Theory of Consumer Behavior As already discussed earlier, the theory is an important tool to interpret and analyse demand curves. Apart from its usefulness as a

Illustrate about the Effective exchange rate Assume that we are interested in external competitiveness of a country, say Japan. To do this we could look at evolution of a speci

1) Consumption is positively related to stock market wealth but negatively related to taxes and tax rates.

Explain the apparent paradox that saving money is good for the individual but might be bad for the economy. Considering the circular flow diagram how is this relevant to public pol

Define the Fisher equation Fisher equation is: Money supply (stock of money) x velocity of circulation of money = price level x total transactions in the economy or     MV =

Q. Explain the long-run Phillips curve? The long-run Phillips curve The augmented Phillips curve has an important consequence: the long-run Phillips curve must be vertical

1. Should each person behave in the workplace the way they do at home? Or should each person have a separate set of ethics for each part of their life? 2. What if you are the bo

Question 1: Critically analyse the costs of inflation. Which of these items is likely to have encouraged many governments in their adoption of inflation as public enemy number