Consider the 2-period household model that you have seen in class. Suppose the household wants to consume equal amounts in both periods. She earns $100 in thefirst period and $150 in the second period. The interest rate depends on whether she saves or borrows. The interest rate on saving is 1%, while the interest rate onborrowing is 10%. What is her optimal consumption?Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were enteredincorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete itand you should not do anything about it.

A Two-period Model is defined as a model where there are two periods: the first period represents…

Consider the 2-period household model that you have seen in class. Suppose the household wants to consume equal amounts in both periods. She earns $100 in the first period and $150 in the second period. The interest rate depends on whether she saves or borrows. The interest rate on saving is 1%, while the interest rate on borrowing is 10%. What is her optimal consumption?

Consider the 2-period household model that you have seen in class. Suppose the household wants to consume equal amounts in both periods. She earns $100 in the first period and $150 in the second period. The interest rate depends on whether she saves or borrows. The interest rate on saving is 1%, while the interest rate on borrowing is 10%. What is her optimal consumption?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.3P

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Question

Consider the 2-period household model that you have seen in class. Suppose the household wants to consume equal amounts in both periods. She earns $100 in the
first period and $150 in the second period. The interest rate depends on whether she saves or borrows. The interest rate on saving is 1%, while the interest rate on
borrowing is 10%. What is her optimal consumption?
Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered
incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it
and you should not do anything about it.

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