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e. (S) lfYaron has the following utility tnction: U= L+ Yes, is it possible that he will choose not to work at all? Explain. No calculation needed. 2) Yudit spends her income on consumption between two periods Cl and C2. Both C1 and C2 are normal goods. Assume that in the initial position, Yudit's income in the fust period is smaller than her inoome in the second period. Yudit is indifl'esence between present and lture and has a convex utility function. The interest rate is equal to the ination rate in the initial position. a. (6) Draw Yudit budget constraint and her optimal bundle. Point out Cl and C2 in the optimal bundle, the intercepts and the slope. b. (3) Are Yndit savings positivelnegativei'zero? Explain. c. (5) What will happen to Yudit's utility if the ination rate increases? Point out the range of the new bundle. d. (6) Show in a new graph the SlutTJty's compensation that is needed due to the increase in the ination rate and point out the new bundle. Show also the substitution and real income effects on the same graph. e. [1) Ignore paragraphs It and it (go back to 1). Suppose that the interest rate increases. Show the change on graph and point out the new bundle. f. (6) How would your answer to pangnplt e will change if it is known that onlyr the interest rate for those who loans money changed and not the interest rate for borrowers? Explain your answer. You can use a graph if necessary. I) There are two consumers, and each one of them has a different utility function: U1 = X'Vl'll and U; = X\" 1"\". a] In both utility functions, both goods are positively monotonic. h) Only in UI both goods are positively monotonic. c] Only in U: both goods are positively monotonic. d) None of the above. Explain