How job loss affects john-s consumption in periods one-two


John Smith behaves according to Irving Fisher's two-period model. Consumption in both periods is a normal good for John. John is initially a saver in period one. John loses his job in period one. His first-period income becomes his unemployment benefits, which are much lower than his period-one income had been. His expected income in period two is unchanged. Illustrate graphically how this job loss affects John's consumption in periods one and two.

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Microeconomics: How job loss affects john-s consumption in periods one-two
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