6. And now for some Shakespeare (who says economists aren't cultured!). In Shakespeare's play Hamlet, Ophelia...

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6. And now for some Shakespeare (who says economists aren't cultured!). In Shakespeare's play Hamlet, Ophelia says, "If I could lend money at the rates I must pay to borrow, I would. And if I could borrow money at the rates I receive when I lend, I would again. But forsooth, although I spend, I neither borrow nor lend." Contrary to Shakespeare's depiction of Ophelia in Hamlet, this state- ment suggests that she is entirely rational according to our intertem- poral model. Draw a diagram to show how Ophelia's remarks can be consistent with rational behaviour if she pays a higher interest rate when she borrows than she gets when she lends (saves). Explain what is happening here. 6. And now for some Shakespeare (who says economists aren't cultured!). In Shakespeare's play Hamlet, Ophelia says, "If I could lend money at the rates I must pay to borrow, I would. And if I could borrow money at the rates I receive when I lend, I would again. But forsooth, although I spend, I neither borrow nor lend." Contrary to Shakespeare's depiction of Ophelia in Hamlet, this state- ment suggests that she is entirely rational according to our intertem- poral model. Draw a diagram to show how Ophelia's remarks can be consistent with rational behaviour if she pays a higher interest rate when she borrows than she gets when she lends (saves). Explain what is happening here.

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Ophelias statement reflects rational behavior within an intertemporal mo... View the full answer