Assume that Clem is an individual who has current income of $26 898 and expected future income of $59.968 They have only $6.295 in current wealth and expect $21,031 in future wealtth If Clem decides he wants to consume twice as much in period two than in period one and faces a real interest rate of 3.4% for both borrowing and saving, answer the following questions 1. What is the optimal level of consumplion in perlod one? Round to 2 decimal places. Do not add in the doltar sign. Be sure to add a negative sign if needed. 2 What is the optimal level of consumplion in perlod twa? Round to 2 decimal places. Do not add in the dollar sign. Be sure to add a negative sign if needed.

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.2P
Question

Economic

Assume that Clem is an individual who has current income of $26,898 and expected future income of $59,968. They have only $6,295 in current wealth and
expect $21,031 in future wealth If Clem decides he wants to consume twice as much in period two than in period one and faces a real interest rate of 3.4% for
both borrowing and saving, answer the following questions.
1. What is the optimal level of consumption in period one? Round to 2 decimal places. Do not add in the dollar sign. Be sure to add a negative sign if
needed.
2 What is the optimal level of consumption in period two? Round to 2 decimal places. Do not add in the dollar sign. Be sure to add a negative sign if
needed.
Transcribed Image Text:Assume that Clem is an individual who has current income of $26,898 and expected future income of $59,968. They have only $6,295 in current wealth and expect $21,031 in future wealth If Clem decides he wants to consume twice as much in period two than in period one and faces a real interest rate of 3.4% for both borrowing and saving, answer the following questions. 1. What is the optimal level of consumption in period one? Round to 2 decimal places. Do not add in the dollar sign. Be sure to add a negative sign if needed. 2 What is the optimal level of consumption in period two? Round to 2 decimal places. Do not add in the dollar sign. Be sure to add a negative sign if needed.
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