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4. Suppose a high-school graduate who is choosing between going to college or work. If she goes to college her income today is zero but
4. Suppose a high-school graduate who is choosing between going to college or work. If she goes to college her income today is zero but her income in the future will be I.. If she chooses to work, her income today and in the future will be I,,. Suppose that the current real interest rate 7 is such that I c w _I _|__- 1+r w 1+r Draw a graph with in the x-axis and ' in the y-axis. In the graph, show the individual's budget constraint and both endowment points: one if she chooses to work and one if she chooses to go to college. Also show the optimal pair selected by the individual (You can choose any point as long it is optimal). Does the optimal pair depend on the work/college decision? Explain
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