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2 A market for lending Two agents trade intertemporal consumption in an exchange economy. Each lives for two we): w, where 6 = 1//. Endowments

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2 A market for lending Two agents trade intertemporal consumption in an exchange economy. Each lives for two we): w, where 6 = 1/\\/. Endowments are e1 = (2, 24) and 62 = (10, 12). Both agents can borrow or save at interest rate 7", subject to the usual budget constraint of paying back all rst-period periods and has utility function borrowing in the second period. 1. Suppose r is determined as part of a competitive equilibrium. Calculate r. 2. Which agent acts as the creditor in period 1, and how much do they lend? How much does the borrower pay back in the second period

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