consumption (L11) Flashcards
1
Q
what does keynesian c function imply
A
increase in current income increases consumption
2
Q
budget constraints with saving, consumption and income
A
c1=y1-s
c2=y2+(1+r)S
3
Q
lifetime BC
A
C1+C2/1+r= y1+y2/1+r
4
Q
how to maximise utility with lifetime BC
A
use indifference curves and find tangency with lifetime BC
when income is lower than consumption it shows borrowing and when consumption is lower than income it shows they’re saving
5
Q
decision to save or borrow depends on
A
interest rates
income path
preferences