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2. Consider the two-period endowment economy discussed in the lectures. The economy is populated are m consumers. The lifetime utility function of each consumer is
2. Consider the two-period endowment economy discussed in the lectures. The economy is populated are m consumers. The lifetime utility function of each consumer is time separable and is given by U(c,d) = u(c) + Bu(d) 00 and y' = 0 and the other half with y = 0 and y' = y. Find the equilibrium level of r (i.e., express r as a function of the exogenous parameters of the model). (C) (13 points) Is there any lending in equilibrium? Calculate the equilibrium level of saving for each group. Explain intuitively your result. (d) (15 points) Which group is better off? Provide an intuition for your answer. 2. Consider the two-period endowment economy discussed in the lectures. The economy is populated are m consumers. The lifetime utility function of each consumer is time separable and is given by U(c,d) = u(c) + Bu(d) 00 and y' = 0 and the other half with y = 0 and y' = y. Find the equilibrium level of r (i.e., express r as a function of the exogenous parameters of the model). (C) (13 points) Is there any lending in equilibrium? Calculate the equilibrium level of saving for each group. Explain intuitively your result. (d) (15 points) Which group is better off? Provide an intuition for your
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