QUESTION 2 Consider the household model that you have seen in class but now assume that 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? O a. In the first period she will save O b. In the first period she will borrow O c. In the third period she will save O d. In the second period her consumption is $100

QUESTION 2 Consider the household model that you have seen in class but now assume that 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? O a. In the first period she will save O b. In the first period she will borrow O c. In the third period she will save O d. In the second period her consumption is $100

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 2SQP

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Question 4 Explain how does a decrease in the current income y affect the consumer's consumption-saving decision. In particular, explain: 1) How will current consumption c, future consumption c', and savings s change; 2) Are there any substitution effect or income effect. Make sure you draw two figures, one for the borrowers and one for the lenders.
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