What is consumption smoothing, Accounting Basics

Note: All illegible answers will be marked incorrect, so please write legibly. If you type and submit the print out of your homework (not email), you will receive 5 points extra credit.

1. Suppose that the Bank of Canada raises the interest rate at which the average household can borrow and lend. Assume that the typical household behaves according to Irving Fisher's two-period model, that consumption in both periods is a normal good, and that households are initially borrowers. Illustrate graphically how the increase in the interest rate in period one affects consumption in both periods.

2.a. What is "consumption smoothing"? Explain what key role "consumption smoothing" plays in the life-cycle hypothesis and the permanent-income hypothesis?

b. Assume you are a twenty-five year old who expects to work for 40 years and then enjoy 30 years of retirement. If you behave according to the life-cycle/permanent-income hypothesis, how would your current consumption change if:

1. You win $1,000,000 in the lottery this year.
2. You expect to get a $1,000,000 "signing bonus" when you get a job next year

Posted Date: 3/13/2013 1:26:06 AM | Location : United States

Related Discussions:- What is consumption smoothing, Assignment Help, Ask Question on What is consumption smoothing, Get Answer, Expert's Help, What is consumption smoothing Discussions

Write discussion on What is consumption smoothing
Your posts are moderated
Related Questions
How to create account for barter transactions? As My Company is providing a service to another company and that company is reimbursing us with his service.

State the steps of Merchandise inventory 1) TRANSFER THE BEGINNING INVENTORY FIGURE Debit INCOME SUMMARY for beginning inventory amount. Credit MERCHANDISE INVENTORY fo

Draw a stem-and-leaf plot for the data set. (Enter numbers from smallest to largest separated by spaces. Enter NONE for stems with no values.)  Data set A: The annual wages of

Q. Valuation of ending inventory? First a merchandising company should be sure that it has properly valued its ending inventory. If the resulting in an ending inventory is over

A good purchased for $480 sells for $700. If the store's operating expenses are 30% of cost, what is the percentage markup on cost? A. 1.5% B. 10.57% C. 15.83% D. 4

The book of Deven Verma could not be tallied. The accountant transferred the difference of Rs. 1,270 in the suspense account on the debit side. The following mistakes were found la

Revenues emerge in the Income Statement credit column of the work sheet. The two revenue accounts in the Income Statement are credit column for Micro Train Company are service reve

Which of the following transactions does not involve an exchange of value? a. Payment of a debt b. Purchase of a building on credit c. Borrowing money d. Loss from theft

I want to learning Accouny basic

Any activity which you perform is assist if you comprise a set of rules to guide your efforts. Moreover, you determine that these rules are of more value to you if they are standar