Assume You Are a 25-Year Old Who Expects to Work $\$ 1,000,000$

question 30

Essay

Assume you are a 25-year old who expects to work for 40 years and then enjoy 30 years of retirement. (Assume a discount rate of 3 percent.) If you behave according to the life-cycle/permanent income hypothesis, how would your current consumption change if: a. You win $\$ 1,000,000$ in the lottery this year.
b. You expect to get a $\$ 1,000,000$ "signing bonus" when you get a job next year.

---

Definitions:

Anna Freud

A pioneer in child psychoanalysis and the daughter of Sigmund Freud, known for her work on defense mechanisms and the psychoanalysis of children.

Repress

The unconscious exclusion of painful impulses, desires, or fears from the conscious mind.

Submissive

The tendency to yield to the authority or will of others, often at the expense of one's own preferences or desires.

Powerful

Having great power, influence, or effect; often used to describe entities or individuals capable of exerting force or authority over others.