Karen earns $75,000 in the current period and will earn $75,000 in the future period. a. Assuming
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Karen earns $75,000 in the current period and will earn $75,000 in the future period.
a. Assuming that these are the only two periods, and that banks in her country borrow and lend at an interest rate r = 0, draw her inter-temporal budget constraint.
b. Now suppose banks offer 10 percent interest on funds deposited during the current period, and offer loans at this same rate. Draw her new inter-temporal budget constraint.
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a Facing an interest rate r 0 Karens intertemporal budget constraint is C 2 150000 ...View the full answer
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