Inter temporal problem: Onish has a choice of either consum- ing in period 0, Co, or...

 

  

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Inter temporal problem: Onish has a choice of either consum- ing in period "0", Co, or in the period immediately thereafter, C1. In the first period his income is $10, 000: in the second, it is $20, 000. He can borrow and lend at the market interest rate of 7%. c. If C1 is a normal good, does a saver remain a saver when the interest rate increases? d. If Co is a normal good, does a borrower remain a borrower when the interest rate increases? e. Suppose Onish is unable to borrow at any rate of interest, but he can lend at 9%. Sketch his inter temporal budget constraint. Inter temporal problem: Onish has a choice of either consum- ing in period "0", Co, or in the period immediately thereafter, C1. In the first period his income is $10, 000: in the second, it is $20, 000. He can borrow and lend at the market interest rate of 7%. c. If C1 is a normal good, does a saver remain a saver when the interest rate increases? d. If Co is a normal good, does a borrower remain a borrower when the interest rate increases? e. Suppose Onish is unable to borrow at any rate of interest, but he can lend at 9%. Sketch his inter temporal budget constraint.

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Q3 Y 10000 Yg 20000 007 Intertemponal RC 3D a S Y1 C 10000 G 30700 Ca 107 10000 4 ... View the full answer