Suppose that permanent income is find outd as the average, Macroeconomics

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Suppose that permanent income is find outd as the average

Suppose that permanent income is find outd as the average of income over the past five years; that is Yp=(Y1+Y2+Y3+Y4+Y5)/5. Suppose further that consumption is given by C=0.9YP.

a) If you have earned $20,000 per year for the past 10 years, what is your permanent income?
b) Suppose that next year you earn $30,000. What is your new Yp?
c) What is your consumption this year and next year?
d) What is your short-run MPC? And long-run MPC?

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Macroeconomics: Suppose that permanent income is find outd as the average

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