ExamTHss07 - Econ 532 SS 2007 Deiter Exam(take-home part 64...

This preview shows pages 1–3. Sign up to view the full content.

Econ 532 SS 2007 Deiter Exam (take-home part, 64 pts) Name ________________________ Thought for the Day: A Those who do not believe in allowing prayer in school have obviously never taken an Econ test. @ Instructions: There are 8 questions, 8 pts each, with point values being distributed equally across question subparts. 1. Refer to our “intertemporal choice” model from Unit 3 for definitions of terms in this question. Assume Daunte has I 0 = \$10,000, I 1 = \$29,000, and r = 10%. a. What is the equation of Daunte’s budget constraint, assuming C 1 is the vertical axis variable and C 0 is the horizontal axis variable. b. How can Daunte increase C 0 by \$1,000, assuming neither I 0 nor I 1 can be changed? c. Draw a graph that shows Daunte being a borrower while maximizing his utility (assume bowed indifference curves as C 1 and C 0 are normal goods for Daunte). d. Explain or show with a graph how Darla can have 1) the same present value of combined incomes this year and next year as Daunte and 2) the same preferences

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document