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9. A consumer has a utility function over consumption in 2 periods given by U (c1, C2) = c/2 + 9c/. They are endowed with an income of 64 in each period. Which of the following is the LOWEST interest rate at which this consumer would want to save a positive amount? (a) 0% (b) 25% (c) 34% (d) 67% (e) The consumer would not want to save at any of these interest ratesThe intertemporal budget constraint gives the income and the consumption of the goods in the two different periods. The consumption of one period effects the consumption of the other period for an individual. Explanation Explanation: The two different periods gives the changes in the income and the need to borrow or save the money o compensate for the further consumption. Step 2 of 4 v2 c2 L 1+r gl L+r MUel MBS = 0 MUl = = cl MUec2 = '_]._?E c2 c2 MRS = & 95c1 MRS =1+r 2 = 0.95cl Whenr =0 cl+c2=y1+y2 l +0.951 = 90 + 100 cl =974 ylcl=00-9744 =-T4 rlcl The consumer will save as the income Is more than the consumption in period 1. Explanation Explanation: The changes in the interest rates effects the consumption and income of the consumer. Step 4 of 4 At 26% interest rates: c2 =1+40.28 0.5 :2 = Lfl 1.05cl + l = 90 + 90 cl =90 yl=l The income and consumption is equal at the 26% interest rates. Explanation Explanation: The equality of income and consumption will encourage individual neither to borrow or save