09. Anna lives for two periods, 1 and 2. Her consumption in the two periods is determined by the tangency point between the indifference curve (I) and the budget line in Figure 4.10 (reproduced below). Fig. 4.10 The real interest rate on consumption with negative saving -(1+1) C2 C (a) Is Anna saving or borrowing in period 1? 6) Suppose the real interest rate falls. Draw the new budget line so that it is tangent to the indifference curve 7. How is Anna's consumption in period 1 affected by the decrease in the interest rate? c) What happens to savings/borrowings in period 1? (d) How is Anna's consumption in period 2 affected by the decrease in the interest rate? (e) Explain the results in terms of income and substitution effects