1. Hailey is a professor in the econ department. Let's assume that she lives only 2-periods....

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1. Hailey is a professor in the econ department. Let's assume that she lives only 2-periods. She is trying to keep her two periods' consumption the same. Her intertemporal budget constraint is given below. C₂ + C₂ 1+r (d) Explain what happens if r increases to = ₁₂ + W|N r = 0.5 Y₁ = 10,000 Y₂ = 15,000 (a) Derive her optimal consumptions. Is she a borrower or lender during her first period? (b) How the above result changes when Y₁ increases to 15,000 (c) How the above result changes when Y₂ increases to 18,000 Y₂ 1+r 1. Hailey is a professor in the econ department. Let's assume that she lives only 2-periods. She is trying to keep her two periods' consumption the same. Her intertemporal budget constraint is given below. C₂ + C₂ 1+r (d) Explain what happens if r increases to = ₁₂ + W|N r = 0.5 Y₁ = 10,000 Y₂ = 15,000 (a) Derive her optimal consumptions. Is she a borrower or lender during her first period? (b) How the above result changes when Y₁ increases to 15,000 (c) How the above result changes when Y₂ increases to 18,000 Y₂ 1+r

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