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       #Post#: 14--------------------------------------------------
       Q3b
   DIR By: Julia.Wirtz
       Date: November 10, 2012, 9:02 am
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       I'm posting a question I got per email and my answer:
       Question:
       Does an increase in income at period t
       increase consumption at period t relative to consumption in
       other
       period?
       Our consumption is c=(δR)^(t-1)m/Σδ^t-1, so an
       increase of m at t
       increases c at any period, as you said in the seminar.
       However, I could not figure out whether the increase of c at t
       is
       relatively bigger than the increase in other period, as the
       question
       ask us.
       Maybe it depends on the relative size of δ and R, but I
       couldn't solve it.
       Answer:
       It is true that the question is a bit ambiguous. But think of
       the
       increase in income this way. Assume your income increase in
       period t
       causes m to double. Then your consumption in every period
       doubles as
       well. In this sense the "consumption at period t relative to
       consumption in other periods" does not change.
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