If temp income increase, will increase both c and savings, so c does not increase as much as the income increase. If permanent income increase, savings does not increase so c can change as much as or more than income increase.
With tax cuts, c increases but if tax cut is perceived as permanent, it increases much more
when a decreases, it creates a welfare-improving role for govt. This, a temp tx cut, is the sol'n. It moves us from the steeper r2 to the flatter r2 with less risk; improving welfare.
...
fully funded SS is a _____ so it ___ make everyone better off
Constraint on private saving behavior; can't
consider the limited commitment model from ch 10. In this case a fully-funded SS program
A. Increases welfare for some borrowers and all lenders
B. Increases welfare for some borrowers but decreases it for all lenders
C. Increases welfare for some borrowe
C: borrowers who were saving less than the amount told to save at
in the PC endowment model, an increase in r
A. Decreases welfare for both borrowers and lenders
B. Decreases welfare for borrowers but has an uncertain impact on lenders
C. decreases welfare for borrowers and increases it for lenders
D. has no impact on t
C
in the model with imperfect info and default risk, an increase in r charged to borrowers
A. decreases welfare for borrowers and lenders
B. decreases welfare for borrowers but has an uncertain impact on lenders--it depends on why the rate to borrowers chan
B
in the limited commitment model,
A. both r2 and amount borrowed are lower than in perfect info case
B. r2 is lower than in perfect info case but amount borrowed is the same as in perfect info case
C. r2 is same as in perfect info case, but amount borrowed
C
Consider the intertemporal model from class, where the consumer has income Y in first period and no income in next period. IF r rises:
A. consumer will be better off
B. consumer will be worse off
C. consumer will be no better or worse off
D. we cant ell i
A
In the intertemporal model, an increase in r
A. decreases welfare for both borrowers and lenders
B. decreases welfare for borrowers but has an uncertain impact on lenders
C. decreases welfare for borrowers and increases it for lenders
D. has no impact on
C.
in 2-period model w limited commitment, if hshlds collateral constraint is binding ten an increase in house prices will cause
A. an increase in current borrowing
B. a decrease in current borrowing
C. an uncertain effect on current borrowing
D. there is no
C
Assume perfect credit mkts and that popn growth rate is higher than IR (n>r). Introducing pay as you go SS will be ____ whereas introducing fully funded SS will be _____
welfare improving, welfare NEUTRAL
in the ch 10 model w imperfect info, hshlds will choose to consume at the endowment pt
A. Because that is the pt where the BC is maximized
B. ppl will never choose to be at the endowment pt
C. only if r1=r2
D.Noneof the above
D
in the ch 9 model w perfect info if y fall w no change in y' then
A. for a lender, the current endowment decreases more than the decrease in current consumpn
B. for a lender, the current endowment decreases less than the decrease in current consumpn
C. fo
A
Eqm expression for r2 is:
A. 1+r2=(1+r1)/a
B. 1+r2=[(1+r1)-(1-a)pH]/a
C. 1+r2=[(1+r1)pH]/a
D.1+r2=[(1-a)(1+r1)pH]/a
B