Question: answer with explanation Question A.4 [8 marks]. Consider the Two-Period Endowment Model of the Household studied in class. Suppose that optimal consumption in the first

answer with explanation

Question A.4 [8 marks]. Consider the Two-Period Endowment Model of the Household studied in class. Suppose that optimal consumption in the first period is given by: C 1+7 X we, (1) 2+r where we is the household's lifetime wealth (after taxes). Is the optimal consumption behaviour implied by (1) consistent with the Permanent Income Hypothesis? Why

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