With solution calculations 100% The Hatfields and the McCoys both earn $50,000 p
ID: 1103543 • Letter: W
Question
With solution calculations 100% The Hatfields and the McCoys both earn $50,000 per year in real terms in the labor market, and both families are able to earn a 25% real interest rate on their to save. The Hatfields saved 8% of their income each year: the McCoys saved 10%. In 2000, the savings In the year 2000, both families began more than the McCoys: in 2001, the Hatfields consumedthan the tfields consume McCoys A. $1,000; $25 more B. $2.000: $25 more C. $1.000: $25 less D. $2,000: $25 less AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Frank . Chapter 190 Learning Objective: 19-03 Discuss the reasons why people save Topic: Why Do People Save? The Hatfields and the McCoys both earn 550.000 per year in real terms in the labor market, and both families are able to earn a 5% real interest rate on their savings. In the year 2000, both families began than the to save. The Hatfields saved 8% of their income each year: the McCoys saved 10%. In 2000, the more than the McCoys: in 2001, the Hatfields consumed Hatfields consumed McCoys A. $1.000: $139 more B. $2.000: $139 more $1.000: $139 less D $2.000: $139 less ACSB Anah
Explanation / Answer
1. Income in 2000 = $50,000
In 2000
Hatfields save 8% = $50,000*8% =$4,000
McCoys save 10% = $50,000*10% = $5,000
Hatfields consume {[($50,000- $4,000) – ($50,000 - $5,000)] = 1000} i.e. $1000 more than the McCoys
In 2001
25% interest on 4000 = 4000(1+.25) = $5,000
25% interest on 5000 = 5000(1+.25) =$6,250
Total earning for Hatfields = $55,000
Total earning for McCoys =$ 56,250
Hatfields save 8% = $55,000*8% =$4,400
McCoys save 10% = $56,250*10% = $5,625
Hatfields consume { [($55,000- $4,400) – ($56,250- $5,625)] = -25 } i.e. $25 less than the McCoys
1. Income in 2000 = $50,000
In 2000
Hatfields save 8% = $50,000*8% =$4,000
McCoys save 10% = $50,000*10% = $5,000
Hatfields consume {[($50,000- $4,000) – ($50,000 - $5,000)] = 1000} i.e. $1000 more than the McCoys
In 2001
5% interest on 4000 = 4000(1+.05) = $4,200
5% interest on 5000 = 5000(1+.05) =$5,250
Total earning for Hatfields = $54,200
Total earning for McCoys =$ 55,250
Hatfields save 8% = $54,200*8% =$4,336
McCoys save 10% = $55,250*10% = $5,525
Hatfields consume { [($54,200- $4,336) – ($55,250- $5,525)] = 139 } i.e. $139 more than the McCoys
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.