1. Aigue tilat wilell comSumption 2 15 Kept fixed (101 led50115 Outside Of IllS model), then consumption C1 in period 1 is a decreasing function of the interest rate. Observe that in Question 1.3, we proceeded differently than in Question 4.5 of the Calculus exercises. There, we found a full solution for Ci and C2 and actually inferred that C1 =W, which is independent of the interest rate. The reason was that when interest rate changed, consumption C2 did not stay the same and actually increased. Why we assume here that C2 is assumed to be kept fixed will be explained in class. What you should take away is that the consumption Euler equation in this case implies (asuming that C2 is fixed) that household demand for consumption is a decreasing function of the real interest rate