Question: 6. Consider an intertemporal choice model where Dean has an income of 10,000 in period 1 and 20,000 in period 2. He can borrow and

6. Consider an intertemporal choice model where Dean has an income

6. Consider an intertemporal choice model where Dean has an income of 10,000 in period 1 and 20,000 in period 2. He can borrow and save at the market interest rate of 7%. a. Sketch his intertemporal budget constraint. b. Illustrate his optimal consumption point (assume Dean is a borrower). 0. Assume the interest rate increases to 10%. Sketch the new budget constraint. Illustrate and explain the substitution and income effects of the interest rate increase

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Do not get married, wait until I come, etc.

Do not come to the conclusion too quickly

Engage everyone in the dialogue