Draw the following intertemporal budget constraints. Be sure to label the intercepts and the slope(s). a. If financial institutions operate in a way where the rate of borrowing is higher than the rate offered to lenders, i.e., rb > rl how would the budget constraint change. b. If financial institutions operate in imperfect credit markets such that they allow a borrower to borrow up to a maximum of 50% of her future income. c. If the government decides to offer a transfer subsidy TS1 in period one and impose a tax in period two such that T2 = TS1 x (1 + r).

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Draw the following intertemporal budget
constraints. Be sure to label the intercepts and
the slope(s).
a. If financial institutions operate in a way
where the rate of borrowing is higher than
the rate offered to lenders, i.e., rb > rl how
would the budget constraint change.
b. If financial institutions operate in imperfect
credit markets such that they allow a
borrower to borrow up to a maximum of 50%
of her future income.
c. If the government decides to offer a
transfer subsidy TS1 in period one and
impose a tax in period two such that T2 = TS1
x (1 + r).
Transcribed Image Text:Draw the following intertemporal budget constraints. Be sure to label the intercepts and the slope(s). a. If financial institutions operate in a way where the rate of borrowing is higher than the rate offered to lenders, i.e., rb > rl how would the budget constraint change. b. If financial institutions operate in imperfect credit markets such that they allow a borrower to borrow up to a maximum of 50% of her future income. c. If the government decides to offer a transfer subsidy TS1 in period one and impose a tax in period two such that T2 = TS1 x (1 + r).
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