What is the future value of $1 of present consumption?

/in /by

This pers Show more A persons utility from present consumption (Cp) and future consumption (CF) is: U = CpCF. This person has an income of $100 today and will have no income (aside from current savings and accrued interest) in the futme. The interest rate is 10% on which a 30% tax is levied. a) What is the future value of $1 of present consumption? b) What is the persons constraint on future consumption in terms of present consumption? c) How much will be consumed today and in the futme under optimal conditions? Sketch this constraint and the optimal point. d) To encomage savings the President eliminates the tax on this persons interest income. Will this policy be successful? What changes under this policy? Explain the net effect of this policy in terms of income and substitution effects. Show less