Two-period model, Macroeconomics

Suppose that a household in a two-period model has income of $30,000 in period 1 and $25,000 in period 2, and the interest rate is 75 percent. Assume that the price of the good is $1 in boh periods. Suppose that the household decides to consume 26,000 in period 1 and 32,000 in period 2. Now suppose that the interest rate falls 50 percent, and the household decides not to borrow or lend at all. Is the household better off or worse off with the higher interest rate?
Posted Date: 11/25/2012 12:16:24 PM | Location : United States







Related Discussions:- Two-period model, Assignment Help, Ask Question on Two-period model, Get Answer, Expert's Help, Two-period model Discussions

Write discussion on Two-period model
Your posts are moderated
Related Questions
Suppose the inverse demand curve for a market is equal to p = 100 -- 0.3Q. The inverse market supply curve is p = 20 + 0.5Q. 1. Calculate the equilibrium price and quantity;

Can the government always reduce the budget deficit by simply increasing taxes? Why or why not? Please explain your answer using the Laffer curve. In addition, use research and sho

1.  Calculate the duration of a par value bond with a coupon rate of 8% and a remaining time to maturity of 5 years. 2. On September 26, the spot price of gold was $320 per ounc

Q. Define Effective exchange rate? Suppose that we are interested in external competitiveness of a country, let's say Japan. To do this we could look at evolution of a particul

Consider the impact of an increase in thriftiness in the Keynesian-cross analysis. Assume that the marginal propensity to consume is unchanged, but the intercept of the consumption


If the reserve bank wants to pursue a contractionary policy, what should it do?

What is the relationship between quality, consumption and demand for health care services?

What are the requirements for something to be considered money? Why does the dollar have value?

The analysis of the speculative demand for money reveals the importance of the level of wealth. Explain this assertion in detail