Suppose that U(c, c) ln c ln c, where 0, and assume that the consumer lends at the real interest rate r 1 and borrows at the interest rate r 2 , where r 1 r 2 Under what conditions is the consumer (a) a borrower, (b) a lender, and (c) neither a borrower nor a lender Explain your results

Question: Suppose that U(c, c) = ln c + ln c, where > 0, and assume that the consumer lends at the real interest

Suppose that U(c, c′) = ln c + β ln c, where β > 0, and assume that the consumer lends at the real interest rate r₁ and borrows at the interest rate r₂, where r₁ < r₂. Under what conditions is the consumer (a) a borrower, (b) a lender, and (c) neither a borrower nor a lender? Explain your results.

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