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2
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1answer
46 views

Does Household final consumption Expenditure include Consumption expenditure of Imported Goods

From World Bank, I got the Household final consumption Expenditure for many countries across time. I wonder if this consumption includes Consumption expenditure of Imported Goods / Import Volume? If ...
0
votes
1answer
24 views

Why does capital initially reduce and then rise with an anticipated future decrease in taxes in the RCK model?

Consider the version of the RCK model where there is a government that runs a constant balanced budget. At $t_0$, the economy is in steady state, with constant tax $T_{old} > 0$ Then, at $...
1
vote
1answer
15 views

if all income is spent on consumption how will it change or affect the economy [closed]

Imagine all incomes being spent on consumption would such a system be in a position of no change.
0
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1answer
34 views

Does lowering consumption help reduce inflation rates?

My country has a whopping 25% annual inflation rate. As far as I know, high inflation implies higher consumption rates, but I was hearing lately that consumption is actually lowering, while inflation ...
1
vote
1answer
47 views

What is the estimated propensity to consume out of wealth, and how does it depend on income levels?

What is the estimated propensity to consume out of wealth, and how does it depend on income levels? To make sure we are talking about the same thing: I am asking what estimates we have on what ...
0
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0answers
19 views

What is the effect of technology shock on consumption in a standard RBC model?

I want to isolate the effect of a technology schock on consumption (both future and current) in a standard RBC model without labor. Given the standard Euler equation $\ u’(c_t)= \beta u’(c_{t+1})(r_{...
0
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0answers
37 views

Difficult intertemporal consumption function

I'm trying to optimize an intertemporal consumption problem but am having trouble with the function: $c_1^n + dc_2^n $ s.t. $ c_1 + c_2/(1+r) =< E$ where E is the total output over the two ...
2
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0answers
41 views

What would happen if there was a one-time redistribution of wealth from the wealthiest 1% to the other 99% of people in the US? [closed]

If you think this is going to lead to answers which are too speculative, let me know, but I think it should be possible to at least make some strong educated guesses... What would happen if there was ...
1
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0answers
2k views

What's the difference between the Life Cycle Hypothesis and Permanent Income Hypothesis?

Would it be correct to say that the Permanent Income Hypothesis (PIH) stipulates that current consumption decisions are made based on future income projections/expectations, while the Life Cycle ...
0
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0answers
39 views

Explanation of these equations concerning consumption theory and permanent income hypothesis

I have some equations which I would like to have explained. They are from some student notes I found online, and contain no further relevant information than what I provide here: The initial ...
5
votes
2answers
59 views

Is there an economically sound way to decide between buying media or a streaming subscription?

How can a consumer (like myself) decide on whether they should pay for a music streaming service based on economic reasoning? Assumptions: The budget allows paying for a € 10/Month music ...
0
votes
1answer
51 views

Why do we model that higher government involvement increases output?

I have just read about the "real intertemporal" model of a macroeconomy in Macroeconomics by Stephen Williamson. I am concerned about how it says any increase in government spending, even if it is ...
3
votes
2answers
160 views

Preference for consumption smoothing and actual smoothing

The typical dynamic consumption-saving under certainty model can be written as: $$ \max V(c)=\sum_{t=1}^{T} \beta^{t-1}\; u(c_t) $$ Subject to the intertemporal budget constraint $$ \sum_{t=1}^{T}\...
2
votes
1answer
41 views

How to prove that GDP grows at the same rate as consumption on Lab Equipment Model?

I'm studying the Lab Equipment Model (Barro-Sala-i-Martin, Chapter 6). I'm having trouble when trying to prove that every variables grows at the same rate as consumption. I was able to prove that $\...
2
votes
1answer
104 views

Precautionary Savings Two-Period model with a second period quadratic utility function

So preferences are defined as $u(c_0)+Ev(c_1)$ Both utility functions are strictly increasing, concave, and twice differentiable. I understand in the setting of $u(c_0)+Eu(c_1)$ when $u(c_0)$ is ...
3
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0answers
41 views

The effect of structural unemployment on revenue from value added tax

Bill Gates and European countries have shown favor for consumption/VAT taxes. The arguments given by proponents are often something along the lines that "we know how to tax certain items more than ...
1
vote
1answer
89 views

Effect of changing Non Labor Income on Consumption-Leisure problem

Given a Utility function $U(c,l) = c - \frac{1}{2}l^2$ , where $c$ is the consumption and $l$ is the number of hours of labour. Let $L$ be the maximum amount of labor, so the amount of leisure is $L - ...
2
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0answers
116 views

Fisher Separation with negative interest rate

In class we discussed Fisher Separation which states that the investment decision is independent of the financing decision. The optimality conditions are that MRS = MRT = (1+i) (i = interest rate). ...
2
votes
1answer
113 views

Log-linearisation Euler Consumption Equation

I am trying to log-linearize the Euler consumption equation in Gali's book. He says: A log-linear approximation of $Q_{t}= \beta E_{t}[(\frac{C_{t+1}}{C_{t}})^{-\sigma}(\frac{Z_{t+1}}{Z_{t}})(\frac{...
1
vote
0answers
105 views

Consumer's maximization problem

I am an undergrad trying to learn the basics of NK models (on my own) and I am having some difficulties understanding the derivation of certain equations. So we have the representative household ...
0
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0answers
38 views

Difference between solving Euler with Lagrangian and just solving in terms of exogenous variables?

I'm struggling to work out the difference of deriving a Euler equation of a consumption function and deriving an equation in terms of exogenous variables (ie $Y_1$, $Y_2$, $r$ and $\theta$). In the ...
0
votes
1answer
160 views

Intuition for the CES consumption index in New-Keynesian DSGE models

I don’t understand, from an intuitive point of view, the CES aggregator in the context of a New Keynsian DSGE model. I understand that the consumption index Ct is the sum of all consumption goods and ...
0
votes
1answer
49 views

Why the GDP does not decrease even when we are saving from our income?

When we are saving from our income then we don't consume as mush as we earn. So the GDP should decrease as well as the income but this does not happen. Why?
0
votes
1answer
29 views

why not use $Ap - p$ instead of $p - Ap$?

I am watching this video about the Leontief input-output model: https://youtu.be/hlaBURtSDO8?t=12m26s One thing I don't understand is: why not use $Ap - p$ instead of $p - Ap$? It seems to make ...
1
vote
1answer
64 views

Is the study of the volunteer sector inappropriate for a labour economist?

In the basics of labour economics the driving factor for increase in labour supply (for the workers in a given market) is increase in wages. The volunteer sector consists of general and skilled ...
1
vote
1answer
46 views

Why does 'government consumption'in NK models not add to utility

In almost all NK models public government consumption (like coastal defences) or private government consumption (like primary and secondary education) is by default 'wasteful'. Government consumption ...
2
votes
1answer
48 views

Are all fixed capital public goods?

fixed capital: any kind of real or physical capital (fixed asset) that is not used up in the production of a product public goods: goods that are non-rival and non-excludable in consumption Both of ...
0
votes
0answers
66 views

Is utility function used in customer data/profile analysis? What alternatives in practice?

Utility function is great theoretical concept but is it used in customer data analysis or in building customer profile (e.g. from Big data or cash register/checkout data, ecommerce history) or in ...
1
vote
1answer
2k views

How does one calculate an optimal consumption bundle if the MRS only contains one variable?

For example, say the MRS has simplified to the form $MRS(x,y) = -y$, given a utility function \begin{equation*} U(x, y) = e^{(x + ln(y))^{1/3}} \end{equation*} With a budget line of, say, $2x + y = ...
3
votes
1answer
78 views
6
votes
1answer
219 views

What was happening in Madagascar during 1971-1996?

In the course of my research I have been examining these days macroeconomic time series for per capital household consumption, using the databank of the WorldBank. The unit of measure was constant ...
1
vote
1answer
63 views

Capital Asset Pricing Modeling for Consumption

Suppose Asset $A$ has a variance of 7 and its returns are negatively correlated with consumption, while Asset $B$ has a variance of 3 and its returns are uncorrelated with consumption. According to ...
5
votes
1answer
260 views

Saturation of durable goods

It seems one factor ignored (or is it?) in economic theory is saturation of durable goods. By this I mean the fulfillment of fixed need for durable goods. We can imagine income to be divided between ...
3
votes
2answers
53 views

Impact of a reduction of distortions in a flat consumption tax

I ask about the survey results of some prominent Australian economists shown here (Which is a similar Australian-centric version of the very interesting IGM Forum Surveys). The results of the survey ...
2
votes
2answers
122 views

Reverse of broken window fallacy for file sharing/piracy

Adult Swim roughly brings forward the following argument in the video 'film piracy feeds babies': While jobs may be lost in the movie or music industry, they might be created in another. Money that ...
5
votes
1answer
122 views

What are the economic benefits of SLAPP in file sharing/piracy?

Spin-off from Piracy/File sharing - Why aren't songs, movies or books given for free? What are the economic benefits of SLAPP in or out of file sharing/piracy? There's a comment in above link ...
1
vote
2answers
129 views

What are some of the economic arguments for gender-neutral marriage?

What are some of the economic arguments for same-sex or gender-neutral marriage (GNM)? Which arguments have merit, don't have merit or have yet to be decided/tested? For example, it is hypothesized ...
1
vote
0answers
38 views

Competition vs. cooperation [closed]

Why has competition evolved to be the leading principle of market based economies? Can this sustain in the long run? I am thinking about cooperation as a better principle of doing things in the long ...
9
votes
6answers
832 views

Piracy/File sharing - Why aren't songs, movies or books given for free?

Why aren't songs, movies or books given for free (+ads)? i. Every minute, people are pirating and there is no stopping that. If people see 0.99 for a song on iTunes and 0.00 for a song on a torrent ...
0
votes
0answers
35 views

Keynesian consumption law not applicable in USA ?

I was looking at some numbers and saw that in USA in 2010 consumption was at 70% but savings were close to zero and that even places were there is high income savings are still low while the keynesian ...
1
vote
1answer
100 views

Will the goods market be in equilbrium along the AD curve?

This is a question which was asked in the entrance to Jawaharlal Nehru University's (New Delhi) entrance for their post-grad program specializing in International Economics in 2014. Which of the ...
2
votes
1answer
104 views

What are the widescale economic ramifications of people holding onto their money instead of spending it?

Pretty simple question: people get rich by saving more money than they spend. What are the implications of people holding onto their money instead of spending it? Do rich people save more money (...
4
votes
2answers
68 views

Re-evaluation of Consumer Price Index (C.P.I.) weights

This might be a very trivial question, however I can't seem to find a very useful answer for this. Problem: How are the weights of the various household items in the Consumer Price Index (C.P.I.) ...
3
votes
0answers
70 views

Europe not self-sufficient in terms of food requirements and consumption?

An acquaintance once told me that Europe is not self-sufficient in terms of food consumption as it does not have enough farmland and farmers to produce enough for all its people, especially in terms ...
1
vote
1answer
196 views

Liquidity trap and consumers' reaction to an increase in money supply

I've understood that when the nominal interest rate reaches the zero lower bound there is nothing that the monetary policy can do to increase the output level of a certain economy. Because $i=0$, no ...
4
votes
1answer
88 views

Lifecycle Consumption Models and Dispersion in Consumption

Lifecycle models base on the assumption that households want to maximize their consumption and at the same time insure themselves against income shocks. However, there is a lot of (c.p.) consumption ...
8
votes
5answers
2k views

How does a reduction in consumer spending in favour of consumer saving, affect economic activity?

Let's say our government runs an advertising campaign, encouraging its citizens to reduce spending money on consumer items, and instead save more money. Let's say the campaign is successful, and ...