Macroeconomics

Question 1 (10 marks)
Explain the assumption regarding consumers’ behavior in the life-cycle-permanent-income hypothesis which needs to be changed in order to explain the presence of precautionary, or buffer-stock saving.
Question 2 (10 marks)
Say Ali defines his permanent income as the average income this year and the past 4 years’ incomes. Furthermore he always consume 3/5 of his permanent income. His incomes record over these years has been:
Yt = 46,000
Yt-1 = 42,000
Yt-2 = 36,000
Yt-3 = 32,000
Yt-4 = 30,000
If next year his income increases to Yt+1 = 50,000 by how much will Ali’s consumption change between year t and year t+1?

Don't use plagiarized sources. Get Your Custom Essay on
Macroeconomics
Just from $13/Page
Order Essay
Place Order
Grab A 14% Discount on This Paper
Pages (550 words)
Approximate price: -
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Try it now!

Grab A 14% Discount on This Paper

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.