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[10] Quique has a utility function U(c1,c2 ) = min (6c1, 3c2) where C1 and c2 are his consumption in periods 1 and 2 respectively.
[10] Quique has a utility function U(c1,c2 ) = min (6c1, 3c2) where C1 and c2 are his consumption in periods 1 and 2 respectively. Quique earns $75 in period 1 and $255 in period 2. a. [5] There is no inflation and he can borrow and save freely at an interest rate of 10%. What will Quique's optimal consumption be in the two periods? b. [5] Suppose that Quique lives in a hyperinflationary country. The price level in period 2 will be three times he triple) the price level in period 1. What will Quique's optimal consumption be in the two periods
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