Case Study

406 WordsSep 4, 20142 Pages
Jenna McElyea Case study IV The life-cycle hypothesis explains the typical pattern of how an individual would save throughout their lifetime. According to the model, individuals tend to borrow to finance education and homes in their younger years. As people reach middle age, they try to pay off all of their debt and save more. As people reach old age, they draw down their saving, or dissave. (p. 141) The impact on the individual’s lifetime consumption pattern states that on an average, net savings tend to be small. The truth is that the life-cycle hypothesis does not take into consideration that many elderly do not seem to draw down their assets as much as predicted. Elderly people are worried about unpredicted expenses so they save more than the life-cycle predicted. (p.141) Per the life-cycle hypothesis suggest that as an economy as a whole, depends on individuals savings. If the economy is full of individual savers than the economy will be considered a saving economy. If the economy is full of dissevers, than as a whole the economy is a dissaver. (p.141) References McEachern, W. A. (2012). ECON Macro 3. Mason, Ohio: Cengage Learning. Forecaster’s pay special attention to investment plan because ”investment varies more than consumption and accounts for nearly all the year-to year variability in real GDP” (McEachern, 2012, p. 144). The Conference board index of leading economic indicators show the key element in a system that signals peaks and troughs in a business cycle. The point of the system is to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component. The United stated has ten components within the conference board leading economic index. The indicators that could affect investment are stock prices, interest rates, 10 year federal bonds less federal funding, and the

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