4. Capture the following in a Fisher Model Intertemporal Budget Constraint Equat

Question

4. Capture the following in a Fisher Model Intertemporal Budget Constraint Equation. Write the equation and define the terms you use. A consumer faces the following .Use a 5-year model (there are 5 periods of income and consumption) A consumer's income grows at an annual percentage rate of g There is a lump sum tax1T There is a proportional tax of percent ty There is a sales tax on purchases of percent t (percent tax on consumption) Banks will offer interest rate rs on savings accounts (percent rate) Banks will offer interest rates re for borrowing The consumer wins the lottery in year 4, amount L (one-time lump sum payment) (Lump sum tax on income) (percent tax on income) (percent rate) . Write out your equation and explain.

Explanation / Answer

Five year consumption income graph is as:

Now equation of consumption and income as

The equation of consumption function is as:

C = A+MD

Where,

C= Consumer Spending

A = Autonomous Consumption

M = Marginal propensity to consume

D = Real Disposable income.

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.