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6. Consider an intertemporal choice model where Dean has an income of 10,000 in period 1 and 20,000 in period 2. He can borrow and
6. Consider an intertemporal choice model where Dean has an income of 10,000 in period 1 and 20,000 in period 2. He can borrow and save at the market interest rate of 7%. a. Sketch his intertemporal budget constraint. b. Illustrate his optimal consumption point (assume Dean is a borrower). 0. Assume the interest rate increases to 10%. Sketch the new budget constraint. Illustrate and explain the substitution and income effects of the interest rate increase
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