1. Suppose an employer offers her employee an advance on their income: that is, given income 3; and y\" today and tomorrow ( assume there are no taxes, 6 = t' = 0), she offers the employee the opportunity to receive a fraction 35 E [[1, y'] of their future income today: and receive 3 less income tomorrow. (a) Use the budget constraint of the employee to nd a condition on the real interest rate -r under which the employee accepts the offer. (13) Under the condition you found in part (a)1 if the employee were allowed to choose the size of the advance 3 E [01 31'], what size advance would they choose? (c) Under the condition you found in part (a)1 what happens to the employee's op timal consumption today and tomorrow? Explain your answer using income and substitution effects