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Consider an individual who is planning his consumption over

1. Consider an individual who is planning his consumption over ?ve periods during which he expects his income to be 4, 10, 16, 12, and 8.

2. What is his permanent income?

3. What is his marginal propensity to consume out of a temporary increase that boosts ?rst period income to 6?

4. What is the m.p.c. if the income increase of 2 is expected to continue into period 2?

5. What is the m.p.c. if the income increase of 2 is expected to continue for every pe- riod of the consumer's life?

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Microeconomics: Consider an individual who is planning his consumption over

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