User Account

All Pages

Lifetime budget constraint of the consumer

Assignment Help Business Management
Reference no: EM131299466

Suppose that a consumer has income y in the current period, income y′in the future period, and faces proportional taxes τ and τ′ on consumption in the current and future periods. There are no lump-sum taxes. That is, if consumption is c in the current period and c′in the future period, the consumer pays a tax τ c in the current period, and τ′c′in the future period.The government wishes to collect total tax revenue in the current and future periods, which has a present value of R = G +G ′1+r. Now, suppose that the government reduces τ and increases τ′, in such a way that it continues to collect the same present value of tax revenue R from the consumer,given the consumer's optimal choices of c and c′.

1) Write down the lifetime budget constraint of the consumer.

2) Show that lifetime wealth is the same for the consumer, before and after the change in tax rates.

3) What effect, if any, does the change in tax rates have on the consumer's choice of current and future consumptions, and on savings? Does Ricardian equivalence hold here?Explain why or why not.

Reference no: EM131299466

Questions Cloud

What advantages do they hold over their competitors : What companies or organizations in the Kingdom of Saudi Arabia have been rethinking their markets and what advantages do they hold over their competitors?
Write an application containing a main method : Write an application containing a main() method that declares several Invoice objects, proving that all the statements in the constructor operate as specified. Save the file as "TestInvoice.java".
What is the minimum value of the convection heat transfer : what is the minimum value of the convection heat transfer coefficient expressed in terms of the sphere diameter and thermal conductivity of the air?
Identify the errors in the php code provided : Identify the errors in the PHP code provided for you in assignment6.php (Download ZIP). Correct the code and create comments explaining why the original code would not work properly.
Lifetime budget constraint of the consumer : 1) Write down the lifetime budget constraint of the consumer. 2) Show that lifetime wealth is the same for the consumer, before and after the change in tax rates.
Why the teller application can call the withdraw methods : Explain why the Teller application can call the withdraw and deposit methods using a SavingsAccount object reference, even though we did not define these methods.
Lemons problem in terms of financial instruments : Explain the lemons problem in terms of financial instruments and the role of financial intermediaries in reducing this problem. Don't use the automobile reference in answering this question.
Compare two sorting and two searching algorithms : You are to compare two sorting algorithms and to compare two searching algorithms by running and collecting data on each. Your data for sorting and searching will be strings of 25 characters in length.
What is the covariance between hp and the market : (a) What is the covariance between HP and the market? (b) What is HP's beta? (c) What is the expected return of HP? (d) What percent of HP's total risk (variance) is idiosyncratic?

Reviews

Write a Review

Business Management Questions & Answers

  What are some potential returns on investment opportunities

What are some potential returns on investment opportunities a business may have as a result of investing in analytics?

  Partners are upstream of leapfrog and which are downstream

Draw a map of the supply chain for the company- leapfrog. Comprise retailers, Capable Toys, and suppliers of main materials such as Tyvek. Which supply chain partners are upstream of leapfrog and which are downstream?

  What is their yield to call

Sadik Inc.'s bonds currently sell for $1,270 and have a par value of $1,000. They pay a $105 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to call (YTC)?

  Economic dimensions-political dimensions

Write a short 2-3 page essay. Use Times New Roman 12, and keep double space. Write about any topic that relates to this course and its themes: Sociology of the Internet. (Economic dimensions, political dimensions, cultural dimensions, or social di..

  Dividend valuation models

Comment on this statement: "Dividend valuation models (such as the Constant Growth DDM shown below) essentially determine the intrinsic value (present value) of future dividends. = -

  Aggregate demand and aggregate supply model

Assuming that a representative economy is at the long-run equilibrium, suppose the economyexperiences improved consumer confidence that increases the economy wide growth of investment. (i) Use the basic aggregate demand and aggregate supply model..

  Why is compliance with international trade laws important

You have been asked to study the issues involved in getting your company totally in compliance with international rules and regulations governing overseas trade. Why is compliance with international trade laws important?

  Accused of using non-job-related criteria

Many employers are accused of using non-job-related criteria in hiring decisions. The best management practice for an employer to use in refuting this type of allegation would mos likely be:

  Communication problems among group members

In Week One, you will choose a generic organization (manufacturing plant, hospital, etc.). Assume that you are a hired consultant for this organization. You have been asked by the president of the organization to prepare a background paper on the ..

  Competitiveness and inventory management

To be competitive, many fast-food chains expanded their menus to include a wider range of foods. Although contributing to competitiveness, this has added to the complexity of operations, including inventory management. In what ways did the expansi..

  Explain the key position to lead your team

Explain how you will recruit (both internally and externally) the members of your team. Identify the key position to lead your team. Then, create the job posting for the position including salary range.

  Advance learner time managmentdo you find time management

advance learner time managmentdo you find time management to not perhaps be very difficult? that you have a good handle

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd