ECON 2202 Lecture 12: Ch3. Two-period model

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31 May 2019
School
Department
Course
Professor
Chapter3
Two model period
Period 1:
! " # $ % & '
Period 2:
()$
*
+ " ,
-
# " %)&'.
Lifetime budget constraint:
()$ &
*
+ " ,
-
! " /0*+ " ,-
/0 $ % & ' " %)& ')
+ " ,
Optimal condition together with the budget constraint determine the optimal consumption C,C
123454) $ + " ,
123454) $164
164)
7
Optimization: Saver vs Borrower.
Experiment 1:
an increase in current income (y goes up, parallel shift out)
C increase(income effect)
C' increase(income effect)
s increase (according to the budget constrain in period 2.)
Experiment2:
An increase in the future income (y' goes up/we goes up)
C increase (income effect)
C' increase (income effect)
S decrease (according to the budget constrain in period 1.)
Experiment3: an increase in interest rate
Consumers are savers:
Lecture1
Tuesday, October 9, 2018
11:11 AM
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