Question: =+b. Write down the constrained optimization problem and the accompanying Lagrange function. Then solve for c1 , current consumption, as a function of a, and

=+b. Write down the constrained optimization problem and the accompanying Lagrange function.

Then solve for c1

, current consumption, as a function of

a, and solve for the implied level of savings as a function of

a, I, and r. Does savings depend on the interest rate?

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