Explain what decisions and calculations a very foresighted ...

[OSWALD]

Explain what decisions and calculations a very foresighted consumer must make to determine her consumption decisions in any period.
 
  What will be an ideal response?

Question 2

Which of the following occurs as the economy moves rightward along a given IS curve?
 
  A) A reduction in the interest rate causes investment spending to decrease.
  B) A reduction in the interest rate causes money demand to increase.
  C) A reduction in the interest rate causes a reduction in the money supply.
  D) An increase in government spending causes a reduction in demand for goods.
  E) A reduction in taxes causes a reduction in demand for goods.

[potomatos]

Answer to Question 1

An individual would have to calculate her financial wealth, housing wealth, and human wealth. Of course, this implies that the individual would have to form expectations of future interest rates, income, and taxes for the remainder of her working life. Once done, the individual would then calculate the amount of consumption per year she preferred given this total wealth. If in the current period, current disposable income is less than this level of C, she would borrow the difference.

Answer to Question 2

A

[OSWALD]

Excellent

[xiaomengxian]

TYSM