Question: Suppose each year is a period in the inter-temporal consumption model. Assume there is no uncertainty and the consumer lives 90 years. Suppose the economy

Suppose each year is a period in the inter-temporal consumption model. Assume there is no uncertainty and the consumer lives 90 years. Suppose the economy suffers a surprising, great recession for exactly 1 year. Please assume borrowing and lending are freely available - anyone can secure a loan. Which statement is correct? Question 9 options: All other answers are incorrect The consumer will increase his consumption today substantially The consumer will decrease his consumption today, but not very much, because life time income did not decline too much (in % terms) The consumer will decrease his consumption today by a substantial amount

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