And now for some Shakespeare (who says economists aren’t cultured!). In Shakespeare’s play Hamlet, Ophelia says, “If I could lend money at the rates I must pay to borrow, I would. And if I could borrow money at the rates I receive when I lend, I would again. But forsooth, although I spend, I neither borrow nor lend.” Contrary to common belief, Ophelia is entirely rational according to our intertemporal model. Draw a diagram to show how Ophelias remarks can be consistent with rational behavior and smooth convex preferences if she pays a higher interest rate when she borrows than she gets when she lends. Explain what happens in words. (Please draw a clear graph and explain) I will give you a big like if your answer make sense.
And now for some Shakespeare (who says economists aren’t cultured!). In Shakespeare’s play Hamlet, Ophelia says, “If I could lend money at the rates I must pay to borrow, I would. And if I could borrow money at the rates I receive when I lend, I would again. But forsooth, although I spend, I neither borrow nor lend.” Contrary to common belief, Ophelia is entirely rational according to our intertemporal model. Draw a diagram to show how Ophelias remarks can be consistent with rational behavior and smooth convex preferences if she pays a higher interest rate when she borrows than she gets when she lends. Explain what happens in words. (Please draw a clear graph and explain) I will give you a big like if your answer make sense.
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