Chapter 16 consumption macroeconomics | Economics homework help

multiple choice
Question

An individual who faces a binding borrowing constraint will have a higher marginal propensity to consume compared to an individual who is unconstrained from borrowing.
True
False

Question 2
Assume the utility functions for current consumption and future consumption are the same. Then, if the patience parameter is 0.90, an individual will need more consumption in the future relative to the present in order to receive the same amount of lifetime utility from current consumption as from future consumption.
True
False

Flag question: Question 3Question 31 pts
Consider an agent with a utility function that exhibits diminishing marginal utility. If consumption rises by 10 units, then total utility will increase the most if the initial level of consumption was
10 units.
20 units.
30 units.
The answer depends on the specific utility function.

Question 4
Consider the neoclassical model with log utility where the patience parameter can take on any number between zero and one. Which of the following statements is true?
An increase in the patience parameter will increase current consumption.
An increase in the patience parameter will increase both current and future consumption.
An increase in the patience parameter will increase future consumption.
An increase in the patience parameter will not change future consumption.

Question 5
If Ricardian equivalence holds, then
a tax cut today financed by tax increases in the future will stimulate consumption.
a tax cut today financed by tax increases in the future will contract consumption.
a tax cut today financed by tax increases in the future will have no effect on the aggregate level of consumption.
a tax cut today financed by tax increases in the future is the best fiscal policy to undertake in a recession where consumption spending is low.

Question 6
If the patience parameter is equal to 0.5 and the interest rate is 5%, then future consumption will be larger than current consumption.
True
False

Question 7
If the patience parameter is one, the marginal propensity to consume is higher if the neoclassical consumption model has three periods instead of having two periods.
True
False

Question 8
If the permanent income hypothesis is correct, which of the following events is likely to raise current consumption the most?
A worker receives an expected salary bonus.
An individual receives interest payments on an asset that has a fixed interest rate.
A student finds a dollar on the ground.
A worker unexpectedly receives a major promotion.

Question 9
In the neoclassical consumption model where utility takes a general functional form, an increase in the interest rate will unambiguously raise first-period consumption.
True
False

Question 10
In the neoclassical consumption model with log utility functions for current and future consumption, an increase in the interest rate will increase the growth rate of consumption.
True
False

Question 11
In the neoclassical consumption model, individuals’ lifetime utility depends on future consumption only.
True
False

Question 12
Suppose that the interest rate is 10 percent. An agent has initial assets of $200,000. Labor income in the current period is $50,000. Labor income in the future period is $110,000. What is the agent’s total wealth?
$150,000
$160,000
$350,000
$360,000

Question 13
Suppose that the patience parameter is equal to one, interest rates are positive, and that utility function u(c) is the same for current consumption as it is for future consumption. Then an agent with a marginal utility of current consumption that is lower than the marginal utility of consumption in the future should

increase current consumption relative to future consumption.
increase future consumption relative to current consumption.
make no changes to consumption.
It is impossible to say what the agent should do to maximize utility.

Question 14
Suppose the economy is composed of some households that obey the permanent income hypothesis as well as some households that are very sensitive to changes in income. Then, an expected 1 percent change in aggregate income will definitely raise aggregate current consumption by 1 percent. 

True
False

Question 15
The idea that changes in consumption are unpredictable because all known information is already taken into account when current consumption decisions are made is known as
the permanent-income hypothesis.
the life cycle model of consumption.
the random walk view of consumption.
diminishing marginal utility of consumption.

Question 16
The limited rationality of economic agents
motivates individuals to place less emphasis on current consumption.
motivates individuals to place more emphasis on current consumption.
motivates limited borrowing.
motivates excessive saving.

Question 171 pts
When income is uncertain, precautionary savings increases.
True
False

Question 18
Which of the following statements about aggregate consumption data is false?
From 1970 to 2015, household debt as a fraction of U.S. GDP has generally been rising.
From 1970 to 2015, the personal saving rate has generally declined in the United States.
Recently, China’s saving rate has been rising, which is consistent with predictions of the permanent-income hypothesis.
From 1970 to 2015, U.S. households have generally increased their consumption.

 Question 19
Which of the following will have the largest increase on current consumption?
An agent who obeys the permanent income hypothesis receives an expected salary bonus of one dollar.
An agent who knows that taxes will increase one dollar in the future receives a tax break of one dollar in the current period.
An agent is worried she will lose a dollar of income this period, so she engages in precautionary saving.
An agent with a binding borrowing constraint unexpectedly finds a dollar on the floor.

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees


We value our customers, and so ensure that our papers are 100 percent original. Our Team of professionals does not miss the mark; they ensure that step by step each paper is written uniquely. We never duplicate or work as we compare papers rest assured. We deliver our work a day before time to ensure that you don’t miss your deadlines. It is not only doing the work but delivering it at the right time. We capture the consequences of late remittances. .

Money-back guarantee

We value customer satisfaction here at popularessaywriters.com and make sure that you get the best value for your Money. It happens that sometimes you can pay twice for your order or may want to cancel it, or you feel that it doesn’t meet your requirements; our money back guarantee will give you the opportunity to get back your money. We will also refund 100% of money paid double. In case your paper does not satisfy your requirements , we request that you notify us via writing within 2 days otherwise on the third day we will assume that you have been satisfied. Do all your correspondences through our email address popularessaywriters@gmail.com.

Read more

Zero-plagiarism guarantee

At popularessaywriters.com, our professional writers know the consequence plagiarism does for our clients. We have updated software’s such as article checker and copyscape to check for originality of the custom papers before submission of the final paper to the you. Our guarantee to the customer is that we will write 100% original papers for them that are quality, timely and of low cost. We have experienced professional and competent PhD writers who will write quality custom papers for you..

Read more

Free-revision policy

. At popularessaywriters.com, we are proud to provide top-quality Essay writing service to our esteemed customers. We are ready to take up that challenging academic assignment that is giving you sleepless nights and simplify it for you according to your desired requirements. We are willing to revise your paper if it does not meet your requirements. At popularessaywriters.com, we do not compromise with quality; thus, we offer unlimited free revisions until the customer is satisfied with their custom paper. Our unlimited free revision services are provided under the following terms:.. .

Read more

Privacy policy

Popularessawriters.com knows that client’s information is an essential tool for our company. It means that whatever the client requests from our service is kept strictly confidential. It means that whoever writes for this company understands the terms and conditions hence you should not be worried because you will never see your work somewhere else...

Read more

Fair-cooperation guarantee

Rest assured that we will always be attentive to your needs and requirements. We belief in the phrase treat your neighbour as you would want them to treat you. We leave nothing to chance and always look forward to a good interaction with each other.. .

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency