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Dramatic shift in the age distribution of the U.S. workforce

In 1965, about 34% of all adult workers were under the age of 34, compared with almost 47% by 1980. Meanwhile, the share of the workforce between 35 years and 59 years shrank from about 60% to 49%. What impact might this dramatic shift in the age distribution of the U.S. workforce have had on the U.S. current-account balance over this 15 year period? (Hint: Consider the difference in savings behavior between younger and older workers.)

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According to the life-cycle theory of consumer spending, consumption today is based not on current income but rather is based on an individual's expected lifetime earnings. In the United States, workers generally enter the labor market between the ages of 18 and 22 and retire from regular employment in their mid-60s. Their average earnings vary dramatically over this time. Weekly earnings soar during the first 10 years of an individual's work life, such that workers in their mid-30s earn roughly twice as much per week as those in their early 20s. Weekly ...

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