Assume you are a 25-year old who expects to work for 40 years and then enjoy 30 years of retirement. (Assume a discount rate of 3 percent.) If you behave according to the life-cycle/permanent income hypothesis, how would your current consumption change if:

a. You win $\$ 1,000,000$ in the lottery this year.
b. You expect to get a $\$ 1,000,000$ "signing bonus" when you get a job next year.

Question

Assume you are a 25-year old who expects to work for 40 years and then enjoy 30 years of retirement. (Assume a discount rate of 3 percent.) If you behave according to the life-cycle/permanent income hypothesis, how would your current consumption change if:

a. You win

\$ 1,000,000

in the lottery this year.
b. You expect to get a

\$ 1,000,000

"signing bonus" when you get a job next year.

a. You win $\$ 1,000,000$ in the lottery this year.
b. You expect to get a $\$ 1,000,000$ "signing bonus" when you get a job next year.

Quizplus · Accepted Answer

The Answer of Assume you are a 25-year old who expects to work for 40 years and then enjoy 30 years of retirement. (Assume a discount rate of 3 percent.) If you behave according to the life-cycle/permanent income hypothesis, how would your current consumption change if:

a. You win $\$ 1,000,000$ in the lottery this year.
b. You expect to get a $\$ 1,000,000$ "signing bonus" when you get a job next year.

Assume You Are a 25-Year Old Who Expects to Work $1,000,000\$ 1,000,000$1,000,000

Assume You Are a 25-Year Old Who Expects to Work $\$ 1,000,000$