However, in some cases workers at an earlier age get access to their savings with no withdrawal penalties when theychange employers.Many workers in this situation spend their accumulated retirement savings on current consumption.Assuming that the worker is merely changing jobs with no change in expected future income, is this behaviorconsistent with the life-cycle/permanent-income hypothesis? Explain why or why not and offer an alternativeexplanation based on behavioral economics.
Add Question HereEssay1 pointsQuestionAssume you are a 25-year old who expects to work for 40 years and then enjoy 30 years of retirement.(Assume adiscount rate of 3 percent.) If you behave according to the life-cycle/permanent income hypothesis, how would yourcurrent consumption change if:
Add Question HereEssay1 pointsQuestionSome taxpayers voluntarily have more taxes withheld from their paychecks during the year in order to receive a largetax refund once a year.These taxpayers give the government an interest-free loan and lose the interest they couldhave earned by saving a portion of the larger paychecks they would have received during the year.Why might aperson make this choice?What does this choice say about the theory of the consumption function?