1. Lectures in Macroeconomics- Charles W. Upton Consumption More on Inheritances

2. Consumption- More on Inheritances 2 The Immortal Consumer U =γ 1 log (c 1 )+ γ 2 log (c 2 )+ γ 3 log (c 3 )+ γ 4 log (c 4 )+ γ 5 log (c 5 )+…

3. Consumption- More on Inheritances 3 The Immortal Consumer U =γ 1 log (c 1 )+ γ 2 log (c 2 )+ γ 3 log (c 3 )+ γ 4 log (c 4 )+ γ 5 log (c 5 )+… U= log (c 1 )+ γlog (c 2 )+ γ 2 log (c 3 )+ γ 3 log (c 4 )+ γ 4 log (c 5 )+… 1>γ>0

4. Consumption- More on Inheritances 4 The Immortal Consumer

5. Consumption- More on Inheritances 5 Hall Test

6. Consumption- More on Inheritances 6 Hall Test

7. Consumption- More on Inheritances 7 Hall Test

8. Consumption- More on Inheritances 8 Hall Test Any changes in z must be unexpected.

9. Consumption- More on Inheritances 9 Hall Test

10. Consumption- More on Inheritances 10 Hall Test

11. Consumption- More on Inheritances 11 Whose Income? cHcH cScS yHyH ySyS

12. Consumption- More on Inheritances 12 Whose Income? cHcH cScS yHyH ySyS If the children make more (less) money, the parents should spend more (less)

13. Consumption- More on Inheritances 13 Whose Income? cHcH cScS yHyH yHyH If the children make more (less) money, the parents should spend more (less) If the parents make more (less) money, the children should spend more (less)

14. Consumption- More on Inheritances 14 Whose Income? cHcH cScS yHyH yHyH If the children make more (less) money, the parents should spend more (less) If the parents make more (less) money, the children should spend more (less) Yes!

15. Consumption- More on Inheritances 15 Whose Income? cHcH cScS yHyH ySyS Suppose the parent gets a raise of $1 and parental spending goes up by 10 times the increase in the child’s spending.

16. Consumption- More on Inheritances 16 Whose Income? cHcH cScS yHyH ySyS Suppose the parent gets a raise of $1 and parental spending goes up by 10 times the increase in the child’s spending. The same ratio should prevail when the child’s income goes up.

17. Consumption- More on Inheritances 17 Whose Income? cHcH cScS yHyH ySyS

18. Consumption- More on Inheritances 18 Whose Income? cHcH cScS yHyH ySyS In Fact,

19. Consumption- More on Inheritances 19 Thoughts

20. Consumption- More on Inheritances 20 End ©2005 Charles W. Upton. All rights reserved