1.1 Graphically demonstrate the Fisher separation theorem

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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1.1 Graphically demonstrate the Fisher separation theorem for the case where an individual ends up lending in financial
markets. Label the following points on the graph: initial wealth, Wo; optimal production/investment (Po, P1); optimal
consumption (Co, CD;: present value of final wealth, W. 1.2 Graphically analyze the effect of an exogenous decrease in
the interest rate on (a) the utility of borrowers and lenders, (b) the present wealth of borrowers and lenders, and (c) the
investment in real assets. Explain please
Transcribed Image Text:1.1 Graphically demonstrate the Fisher separation theorem for the case where an individual ends up lending in financial markets. Label the following points on the graph: initial wealth, Wo; optimal production/investment (Po, P1); optimal consumption (Co, CD;: present value of final wealth, W. 1.2 Graphically analyze the effect of an exogenous decrease in the interest rate on (a) the utility of borrowers and lenders, (b) the present wealth of borrowers and lenders, and (c) the investment in real assets. Explain please
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