3i)Consider the household lives for 3 periods. She earns $100 in the first period, $110 in the second period, and $120 in the third period. Her goal is to consume equal amounts in all periods. The interest rate is the same in all periods. Which of the following statements are true? a. In the first period she will save b. In the first period she will borrow c. In the third period she will save d. In the second period her consumption is $100 3ii) The household now lives in 2 periods. The goal of the household is to consume twice as much in period 2 as in period 1. She earns $100 in the first period and $150 in the second period. The interest rate is 5%. What is her optimal consumption and optimal saving in the first period?
Question 3 is consists of two subquestions.
3i)Consider the household lives for 3 periods. She earns $100 in the first period, $110 in the second period, and $120 in the third period. Her goal is to consume equal amounts in all periods. The interest rate is the same in all periods. Which of the following statements are true?
a.
In the first period she will save
b.
In the first period she will borrow
c.
In the third period she will save
d.
In the second period her consumption is $100
3ii) The household now lives in 2 periods. The goal of the household is to consume twice as much in period 2 as in period 1. She earns $100 in the first period and $150 in the second period. The interest rate is 5%. What is her optimal consumption and optimal saving in the first period?
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