Question: Suppose there are two time periods, = 1 and = 2. The consumer earns income 1 and 2, and consumes 1 and 2, in periods

Suppose there are two time periods, = 1 and = 2. The consumer earns income 1 and 2, and consumes 1 and 2, in periods 1 and 2 respectively. The net and gross real interest rates are and = 1 + respectively. What is the consumer's budget constraint in terms of the gross interest rate ? Defining permanent income as = 1 + 2/

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