Practice Questions

The Supply of Savings and Demand to Borrow Practice Questions

For the next three questions, consider the following scenario:

Gwen is a real estate agent, and she knows that she will have some good years and some bad years, but she wants to smoothe her consumption over time. She figures that half the time she’ll earn $90,000 per year, and half the time she’ll earn $20,000 per year. These numbers are after taxes and after saving for retirement, so these numbers are all she has to worry about.