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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.
Suppose an investment has three possible outcomes. There is a 30% chance that it brings a profit of 4,000,000. There is a 50% chance that it brings a profit of 1,000,000. There is a 20% chance that is brings a profit of 0. What is the expected pro..
Discuss the importance of the average, the trend, the seasonality, the cyclical, and the random portions of the variation in a data series when trying to forecast the quantity demanded of a firm's product. A time series consists of a number of comp..
Draw the daily budget constraint without any program participation for the single parent described above. On the same graph, draw the daily budget constraint under TANF for the single parent described above. At what level of money income does the ..
At its current level of production, a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve
Case Situation: You are a senior member of an international risk management firm. An important and long standing client with significant operations in the UK, EU and North America has come to you for advice on the potential impact of the British e..
What condition holds when the firm is maximizing profits? Explain in words what the math of the answer means. (b) What conditions do the functions R(Q) and C(Q) have to satisfy for you to know that the quantity Q* that satisfies the condition in (..
Briefly describe the economic problem you have selected - Assess the impact the problem poses to society and design an economic policy solution to the problem.
Provide one example of a good the US would be considered to have a comparative advantage in producing. Why do you think the U.S. has this comparative advantage.
Assume that your shareholders own only U.S. stocks. Would you expect an overseas investment to have above- or below-average risk for them.
1. Using the file in this homework folder (women_job.xlsx), first estimate the linear probability model: Job = f(Married, School, Age) in STATA. (Include your STATA work) a. Report the values of the coefficients and p-values for each independent vari..
Florida Citrus Mutual, an agricultural cooperative association for citrus growers in Florida, needs to predict what will happen to price and output of Florida oranges under situations below.
Why do you think governments in developed nations continue to lavish extensive support on agricultural producers, even though those producers constitute a very small segment of the population?
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