You are currently an economics major in college. According to a recent study, you will earn about $98,000 in the future. But as a college student, working for McDonald's, you are only pulling in $15,000 today. You also have high school graduation gifts, assets worth $10,000. Suppose that the real interest rate is 5 percent, $\beta = 1$
, and utility is logarithmic.
a. What is the sum of your human and total wealth?
b. What is your consumption today? In the future?
c. What happens to your consumption if, rather than making $98,000, you make $102,000 in the future?

Question

You are currently an economics major in college. According to a recent study, you will earn about $98,000 in the future. But as a college student, working for McDonald's, you are only pulling in $15,000 today. You also have high school graduation gifts, assets worth $10,000. Suppose that the real interest rate is 5 percent, $\beta = 1$ 
, and utility is logarithmic. 
a. What is the sum of your human and total wealth?
b. What is your consumption today? In the future?
c. What happens to your consumption if, rather than making $98,000, you make $102,000 in the future?

Quizplus · Accepted Answer

The Answer of You are currently an economics major in college. According to a recent study, you will earn about $98,000 in the future. But as a college student, working for McDonald's, you are only pulling in $15,000 today. You also have high school graduation gifts, assets worth $10,000. Suppose that the real interest rate is 5 percent, $\beta = 1$ 
, and utility is logarithmic. 
a. What is the sum of your human and total wealth?
b. What is your consumption today? In the future?
c. What happens to your consumption if, rather than making $98,000, you make $102,000 in the future?

You Are Currently an Economics Major in College β=1\beta = 1β=1

You Are Currently an Economics Major in College $\beta = 1$