1. Lectures in Macroeconomics- Charles W. Upton Consumption More on the Life Cycle

2. Consumption-More on the Life Cycle 2 The Base Case PeriodWage Rate 10 2300,000 3630,000 40 r= 50%

3. Consumption-More on the Life Cycle 3 The Results

4. Consumption-More on the Life Cycle 4 Expected Doubling of Income PeriodWage Rate 10 2300,000 600,000 3630,000 1,260,000 40 r= 50%

5. Consumption-More on the Life Cycle 5 Period One Calculations

6. Consumption-More on the Life Cycle 6 Consumption

7. Consumption-More on the Life Cycle 7 C Y C=  +  Y  Our simple example shows why consumption tends to remain a constant percentage of income over time

8. Consumption-More on the Life Cycle 8 C Y C=  +  Y  Our simple example shows why consumption tends to remain a constant percentage of income over time Our simple example shows why consumption adjusted for age tends to a constant percentage of income.

9. Consumption-More on the Life Cycle 9 Some Assumptions PeriodWage Rate 10 2300,000 3630,000 1,260,000 40 r= 50%

10. Consumption-More on the Life Cycle 10 Periods One and Two

11. Consumption-More on the Life Cycle 11 Period Three

12. Consumption-More on the Life Cycle 12 Period Three

13. Consumption-More on the Life Cycle 13 Period Three

14. Consumption-More on the Life Cycle 14 The Moral The response to changes in income depend on when expectations change.

15. Consumption-More on the Life Cycle 15 A Problem PeriodWage Rate 10 2200,000 3400,000 40 r=100%

16. Consumption-More on the Life Cycle 16 A Variant PeriodWage Rate 10 2200,000 3400,000 40 r=100% Our individual expects to receive an $80,000 inheritance in period 4

17. Consumption-More on the Life Cycle 17 End ©2005 Charles W. Upton. All rights reserved