Question: An economy's representative agent has the following period utility function: u(C) = y exp(-C/y): >0 and seeks to maximize lifetime utility given perisheable endowments

An economy's representative agent has the following period utility function: u(C) =

An economy's representative agent has the following period utility function: u(C) = y exp(-C/y): >0 and seeks to maximize lifetime utility given perisheable endowments Y and Y2: With this in mind: U = s.t. : : U(C) + BU (C) W = Y + RY = C + RC 1 R= (1+r) (a) Solve period 2 consumption as a function of C, R and B. (b) What is the optimal level of C, given W, R and B.

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