Unformatted text preview: han before?
Since nothing else has changed, and her optimal choice without the constraint resulted in her
borrowing, she will set s=0 and consume all of her income in each period.
, ; . Part C. Suppose instead that $53,500;
0.12; 1; , . , , 1, while all the other variables stay the same:
1.05. $50,000; C1) Solve for the consumer’s optimal quantities of and . Again interpret the value of , that is what
does tell you about her preferences for consumption today versus consumption tomorrow?
, . , , .
Since . . , this consumer places equal value on consumption today relative to consumption tomorrow.
C2) What is her utility at the optimum?
, , . , . C3) Is she a saver or borrower? How much does she save or borrow? , , , This consumer is a saver; her period one expenditures on consumption are less than her period 1
income. – ,
– this is the amount she saves.
C4) How much income does she have to purchase consumpt
tion in period 2 as a result of her
savings/borrowing decision? , C5) How much does she earn/pay in interest? .
$ . She earns this much in interest.
C6) Figure 2 below plots the personal savings rate in the U.S . against the 3 month Treasury Bill rate (an
interest rate). Up until the Monetary Control Act of 1980, th e pa...
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- Fall '07
- Supply And Demand, Stock and flow, Saving