Hw3 - ECO 301 Intermediate Macroeconomics Spring 2010...

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ECO 301 Intermediate Macroeconomics Spring 2010 Instructor: Yangyi Shan Homework Assignment 3 Due Day: Tuesday, Mar. 16, 2010 at the beginning of lecture Instructions: Please write your name, student ID on the first page. Please show your work. Please put your answers in the order of the questions Please staple your homework 1. (40 points) Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = c f ) and both have no current wealth. However, the two consumers have different income streams. Person A’s current income, y A , = 100, and future income, y f A , = 121. Person B’s current income, y B , is 120, and future income, y f B , = is 99. The real interest rate is 10% (0.10). (a). Calculate the present value of lifetime resources (PVLR) for consumer A and consumer B, respectively. (4 points) (b). Draw consumer A’s budget constraint. How does the budget constraint of consumer A compare to the budget constraint of consumer B? Explain. (4 points)
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This note was uploaded on 05/05/2010 for the course COM 4123 taught by Professor Ted during the Spring '10 term at SUNY Albany.

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Hw3 - ECO 301 Intermediate Macroeconomics Spring 2010...

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