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12 PTS] Suppose you have an income of $200 this year and you expect an income of $110 next year.

Question:

12 PTS] Suppose you have an income of $200 this year and you expect an income of $110 next year. You can borrow and lend mone
12 PTS] Suppose you have an income of $200 this year and you expect an income of $110 next year. You can borrow and lend money at an interest rate of 10%. Consumption goods cost $1 and there is no inflation. (a) 13 PTs] Write the present value and the future value of your endowment? Show your budget set on the (b) 13 PTs] Suppose that you have the utility function U . Find analytically your optimal choice and graph. show it on the graph. Does the optimal consumption involve saving or borrowing? Find optimal savings S. (c) [3 PTSI Find the optimal consumption bundle when r 15%. (d) [3 PTs] Suppose that consumption in the two periods are perfect complements, so that your utility and function is min cı, сг). Does the optimal consumption involve saving or borrowing when r when r 15%? 10

Answers

81Y-200, ta=110, s,-15% Poesent value ot endowment Yt2 Cifo QCIto)Date G. 3 Clto) 2(rto) optimal ton n) Noo as γ 70, 80 Ga>S1-80ft involves 8aNing ha. .1 2.1 thus ):015 mvolueazaong as C14 Ct

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