Problem 1 Consider Figure 10.3b in Chapter 10 in the online book. The figure illustrates the decision of a consumer, named Julia, about how much to consume now (for example this year) versus later (for example next yea r). a) Draw the indifference curves of a person, Marco, who is more impatient than Julia. b) What is meant in economics by \"consumption smoothing\"? Why do you think it is optimal for consumers to engage in consumption smoothing? c) The Federal Reserve is expected to continue raising a benchmark interest rate (the Federal Funds Target) over the next few months. Discuss whether you expect a rise in the interest rate to reduce consumption more in an economy in which a larger proportion of households behave like Julia, or one in which a large proportion of households behave like Marco. \fConsumption later (5) Julia's indifference curve (higher utility) Julia's indifference curve Consumption now (5) Julia's optimal choice Given the choice shown by the line CE, Julia will choose point F. It is on the highest attainable indifference curve. She prefers to smooth consumption between now and later. Figure 10.3a Consumption smoothing: Diminishing marginal returns to consumption