1.1 Graphically demonstrate the Fisher separation theorem for the case where an individual ends up lending in financialmarkets. Label the following points on the graph: initial wealth, Wo; optimal production/investment (Po, P1); optimalconsumption (Co, CD;: present value of final wealth, W. 1.2 Graphically analyze the effect of an exogenous decrease inthe interest rate on (a) the utility of borrowers and lenders, (b) the present wealth of borrowers and lenders, and (c) theinvestment in real assets. Explain please

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1.1 Graphically demonstrate the Fisher separation theorem

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Question

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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