Consider an economy with a growing population in which each person is endowned w
ID: 1183026 • Letter: C
Question
Consider an economy with a growing population in which each person is endowned with y1 when young and y2 when old. Assume that y2 is sufficiently small that everyone wants to consume more that y2 in the second period of life. Bear in mind that under the new assumptions, the equations and graphs you find may differ from the ones found previously. Apply the steps taken in Equations 1.1 through 1.6 to find the feasible set. Assume that all individuals within a generation will be treated alike and graph the set of stationary per capita feasible allocations. Draw arbitrarily located but correctly shaped indifference curves on your graph and point out the allocation that maximizes the utility of the future generations. Turning now to the monetary equilibrium, find the equation representing the equality of supply and demand in the market for money. Assume a stationary solution and a constant money supply. Use the equation in part c to find Vt+1/vt. Draw the budget set for an individual in this monetary equilibrium. Does this monetary equilibrium maximize the utility of future generations? Explain.Explanation / Answer
Find GDP, National Income Accounting “Starter” Problem: Gross Investment [Ig] = 670 Net Exports [Xn] = -74 Wages = 2373 Rent = 14 Interest = 288 Corporate Profits = 299 Proprietors’ Profits = 242 National Income = 3216 Indirect Business Tax = 338 Depreciation = 439 Transfer Payments = 648 Social Security Tax = 355 Personal Income = 3294 Personal Income Tax = 493 Personal Savings = 219 Corporate Income Tax = 160 Corporate Savings = 129 Government Surplus/Deficit = -117