Assume That Andrew Marcus Is 25 Years Old and Expects $\$ 20$

question 15

Essay

Assume that Andrew Marcus is 25 years old and expects to live to age 75. a. If he wins $\$ 20$ million in cash (after taxes) in the lottery and retires, how much will he consume each year if he wants to have constant consumption and use up all his wealth by the time he dies? Assume the real interest rate is zero.
b. If his total income in the year he wins the lottery is his lottery winnings, what will his average propensity to consume (APC) be for that year?
c. If he has no other earnings in later years but continues his constant consumption, what will his average propensity to consume be for those later years?
d. What is Andrew's "permanent income" in the year he wins the lottery? What is his "transitory income"?

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Definitions:

Children Under 18

Individuals who are legally considered minors and are below the age of 18 years old, often subject to specific legal protections and restrictions.

White Males

A demographic group defined by race (white) and gender (male), often discussed in contexts of social, economic, or political analysis.

Personal Fortune

Refers to the total value of an individual’s assets, including money, property, and investments, minus liabilities.

William Gates

Co-founder of Microsoft Corporation and one of the world's wealthiest individuals, known for his contributions to technology and philanthropy.