A consumer is making lifecycle consumption plans for this year and the next. The consumer's current real income after taxes is$60,000.She knows that her real income after taxes will be$44,000in the next year. She can borrow and lend freely at an annual real interest rate of 10%. Currently, the consumer has no wealth.

(a) If the consumer wants to consume this yearthree times as much asthe consumption next year, then how much should sheconsumeeach period?Does she borrow or save this year?

(b)Now assume thatthe interest rate is increased to 50%, i.e.r=0.05. Then calculate the new consumption of each year. Comparing withpart (a),what can you say about her saving behavior responding to the interest rate change?

(c)Now assume thatthe consumer currently has asset of $20,000. Underthe same assumption of (a), 10% interest rate,how much should sheconsumeeach period?Does she borrow or save this year?