101-2011-L14

101-2011-L14 - Econ101 IntertemporalChoice Reading n Today:...

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Econ 101 Intertemporal Choice
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Reading n Today: n Williamson, Chapter 8, pages 262-279 n Next time: n Williamson, Chapter 8, pages 279-291
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Last iclicker question Lower tax Tax revenue decreases
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Last iclicker question Lower tax Tax revenue decreases
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Intertemporal Choice n No role for  savings investment government debt  in a static model n To study determinants of those, we  need more theory n Need to consider the choice of  consuming  today  versus  tomorrow   explicitly
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Budget constraints n Current period  budget constraint n Future period  budget constraint n Linked with current period BC by savings n No assets saved or borrowed at the end of  second period s r t y c ) 1 ( ' ' ' + + - = t y s c - = +
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The lifetime budget constraint n Eliminate savings from future period BC n Substitute into current period BC Present value of consumption = Present value of income minus present value of taxes r t y c s + + - = 1 ' ' ' r t t r y y r c c + - - + + = + + 1 ' 1 ' 1 '
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This note was uploaded on 12/26/2011 for the course ECON 101 taught by Professor Dumbass during the Fall '08 term at UCSB.

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101-2011-L14 - Econ101 IntertemporalChoice Reading n Today:...

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