Faculty Sponsor: Gouri Suresh
This project uses a learning model, to simulate the savings v consumption decision for an economy of 100 agents facing a fixed demand for loanable funds. Each agent has a future period discount factor, and utility is based on their consumption in this period and a discounted next period income. This project then compares the interest rate, utility values, and incomes of the economy under both different degrees of income equality and different consumption assumptions. The three different income distributions are: perfect equality, an economy where one person earns 20% of the total income, and the other 99 members of the economy equally split the remaining 80% (GINI = .19), and an economy with two groups, the first of which makes up 60% of the population and receives 40% of the total income, and the second which makes up 40% of the economy but receives 60% of the total income (GINI = .2). The different consumption types of consumption structures are either a structure where all consumption is discretionary, or an economy where agents are restricted by a certain amount of subsistence consumption.