- Consider an economic agent with a logarithmic stage utility function v(x)=lnx. (Recall that v(x)=1/x for this case) - She lives for two periods and discounts the second period utility with a factor of =5/6 - Her income is M1=20 in the first period and M2=12 in the second one - The interest rate is r=3/5 and the prices are constant at 1 (There is no inflation) (1) Find the optimal profile of consumption levels in the two periods (2) Is the agent saving or borrowing in the first period? By how much? - Consider an economic agent with a logarithmic stage utility function v(x)=lnx. (Recall that v(x)=1/x for this case) - She lives for two periods and discounts the second period utility with a factor of =5/6 - Her income is M1=20 in the first period and M2=12 in the second one - The interest rate is r=3/5 and the prices are constant at 1 (There is no inflation) (1) Find the optimal profile of consumption levels in the two periods (2) Is the agent saving or borrowing in the first period? By how much