intermediate macro, see file. dynamic consumption theory, credit market, credit market imperfection, Ricardian equivalence

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intermediate macro, see file. dynamic consumption theory, credit market, credit market imperfection, Ricardian equivalence
Answered Same DayNov 07, 2021

Answer To: intermediate macro, see file. dynamic consumption theory, credit market, credit market imperfection,...

Kushal answered on Nov 15 2021
168 Votes
1. Timing of the expenditures have changed.
a.
i. The proposal seems to be working on the assump
tions that the inflation measures, the yields of the economies and the discount rate remains the same.
ii. However, this assumptions, as witnessed in the past are not full proof and there have been instances where the discount rate have significantly changed leading to the present value of the expenditures being different.
iii. Consumer’s flexible labour supply does affect this due to the change in this labour supply will adversely impact the discount rate.
b. Timing of the financing of expenditures and timing of the expenditures.
i. Based on the Ricardian’s equivalence theorem, the financing of the expenditures, in the other words tax now or tax later is neutral.
ii. If the financing has been done through extra debt that means to repay that loan government will have to borrow and repay that amount later.
iii. The other sources are...
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