Question: QUESTION 5. Intertemporal Consumption Decisions. Consider a person who chooses consumption x1 and x2 in the current (x1) and future (x2) period to maximize the

QUESTION 5. Intertemporal Consumption Decisions. Consider a person who chooses consumption x1 and x2 in the current (x1) and future (x2) period to maximize the utility function U (x1, X2) = x12. This person has income /1 > 0 in the first period and 12 > 0 in the second. (a) Formulate the relevant utility-maximization problem, and find the demand function for x2. (b) Let /1 = 12 = 100 and r = 0.1. Does this person borrow or save money, or neither? (c) Now suppose the interest rate increases. How are current and future consumption affected for this person? What happens to the amount this person borrows or saves

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