Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

Suppose Frank will earn $1 M during his working life and must decide how to spread that between consumption during his working life (Cp) and consumption during retirement (Cf). Assume that the real interest rate between the two periods is 100% and that both Cp and Cf are normal goods.

(a) prepare out the equation for Frank's budget line and illustrate it in a diagram with Cp on the horizontal axis and Cf on the vertical axis. What is the relative price of Cp? Identify it on your diagram.
(b) Suppose Frank chooses to consume $0.5 M during his working life. How much does he save? What is Cf? Illustrate this choice with an indifference curve and identify the level of saving.
(c) Suppose that the government decides to tax away all interest income, so that the real after-tax rate of interest between the two periods falls to 0%. Illustrate the new budget line in your diagram. Suppose Frank still chooses to consume $0.5 M during his working life. Illustrate this choice with an indifference curve. What does this choice tell you about the income and substitution effects of the change in the interest rate with respect to Cp?
(d) Show that Frank would prefer that the government not tax interest income but rather tax his current earnings by $0.25 M.
(e) Go back to the original situation of parts (a) and (b). Now suppose the government institutes a mandatory public pension plan that has Frank paying $0.25 M today, but with a promise of receiving $0.5 M in the future. Is he made better off? What happens to his amount of private saving?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M946182

Have any Question? 


Related Questions in Microeconomics

Can you write a great paper on a research economic topic10

Can you write a great paper on a Research economic topic 10 page paper Including abstract, introduction, content and conclusion, reference. You can choose any economic topics and analyze the issue from your own perspecti ...

Assignmentlearning objectives covered1explain 3 ways the

Assignment Learning Objectives Covered: 1. Explain 3 ways the statement of goals, application of rewards, and institution of discipline affect and motivate ethical behavior in individuals 2. Demonstrate how roles and aut ...

Introduction to economic evaluation of health promotion

Introduction to Economic Evaluation of Health Promotion Interventions Assignment Evaluating Cost-effectiveness using Markov cohort models: The HPV case The goal of this assignment is to provide students with applied prac ...

Assignment maximizing profits and minimizing lossesconsider

Assignment: Maximizing Profits and Minimizing Losses Consider a supplier of agricultural equipment who is deciding how much of two products should be produced by his firm. You determine what the two products are. Now cre ...

Assignmentyou are the director of safety and health at

Assignment You are the Director of Safety and Health at Rotorcraft America, a mid-sized company that designs, manufactures and sells helicopters. Your organization has manufacturing operations in San Francisco, Californi ...

Econ discussionwith everything discussed with this course

Econ discussion With everything discussed with this course, first watch How we can make the world a better place by 2030. Then, offer your considerations as to whether this could work or not. Within your response, provid ...

Assignmentwhat are the two distinguishing properties of a

Assignment What are the two distinguishing properties of a public good? Explain each in one or two sentences. Give an example of a public good different from any of the examples in your text or my notes. What is the "fre ...

Assignment-money and pricesjaydeethe organizations

Assignment-Money and Prices Jaydee The organization's strategic plan you wrote about in Week 2 calls for an aggressive growth plan, requiring investment in facilities and equipment, growth in productivity, and labor over ...

Assignmentchoose one of the readings from chapters 14 15 or

Assignment Choose one of the readings from chapters 14, 15, or 16 and summarize, explain, and evaluate the main points of the reading in a minimum of 3 paragraphs. Do not simply cut and paste from the reading, but summar ...

1 please prove that two indifferent curve cannot cross each

1. Please prove that two indifferent curve cannot cross each other. 2. Please solve the following maximization problem u = √x 1 + x 2 max√x 1 + x 2 , st, p 1 x 1 + p 2 x 2 ≤ m 3. a. When prices are (p 1 , p 2 ) = (1, 2) ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro