5. Suppose that there is a two period exchange economy, in which the representative con- sumer has endowment income of y in the current period and y' in the future period, and wishes to consume in both periods of life. The rate at which this consumer can borrow or lend is r. Explain using equations and graphs what the permanent income hypothesis is. Suppose that the representative consumer now faces a higher interest rate on borrowing N r than on lending. Use graphs and equations to show the consumer's optimal choice in this case. Does the permanent income hypothesis hold in this case? 6. Consider an economy with an overlapping generations str