2. Ination may also impact individual consumer decisions in several different ways. Here, let's explore how ination might impact consumer savings decisions. Maya has slim and lives for 2 periods. In period 1, Maya divides her wealth between units of consumption (c1) and savings (3). The period 1 price of each unit of consumption is 1. Each pound saved earns interest at the interest rate, r (so 1 saved in period 1 becomes .8 1 + r in period 2). In period 2, Maya consumes her savings; denote period 2 units of consumption by (:2. The period 2 price of each unit of consumption is l + 2', where 2' is the period 1 to period 2 rate of ination. Maya's utility function is U(C1,C2). (3) Write down and graph the budget constraint that captures the trade-off between period 1 and period 2 consumption. In your graph, place c1 on the vertical axis and 02 on the horizontal axis. Label the intercepts. In the same picture, graphically illustrate the impact of an increase in the ination rate, 1', on the budget constraint. (6 points) (b) Explain intuitively and mathematically the property of diminishing marginal rate of substitution (MRS). Provide an example of a utility function that does not have this property. Finally, explain why it is important to take this property into consideration when solving the consumer's utility maximization problem. (7 points) (c) Suppose U031, C2) = \\/c_1 + \\/c_2. Compute Maya's marginal rate of substitution (MRS) when c1 = 4 and c2 = 1. In words, provide an interpretation of the MRS at this consumption bundle. (5 points) (d) Suppose U (c1, c2) = M + \\/c_2. Solve for Maya's optimal choice of savings. Comment on how this choice is impacted by the ination rate and provide the economic intuition for your nding. [12 points)