Given the utility function:

U=lnc + l + lnc' + l'

and the budget constraint:

w(h-l) + w'(h-l')/(1+r) = c + c'/(1+r) where c = current consumption, c'= future consumption, l=current leisure, l'=future leisure, and r is the market interest rate. Suppose that the current wage, w=20 and the future wage w'=22.

What is the optimal value of current consumption, c? Show all steps.

Answer rating: 100% (QA)

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