(a) If the interest rate were bigger than 0, both consumers would like to OConsume more in period 1 than in period 2 OConsume more in period 2 than in period 1 OConsume an equal amount in period 1 and period 2 (b) What is the equilibrium interest rate? ONone of these 015% 010% 05% O20% (c) In the equilibrium above, which of the following is true? OBoth consumer A and B are borrowers ONone of these are true OBoth consumer A and B are savers Consumer A is a saver and consumer B is a borrower Consumer A is a borrower and consumer B is a saver(d) Consumer A's discount factor changes to BA = 0.8. The endowments remain the same. In the new equilibrium, which of the following is true? (Hint: You do not need to solve explicitly for the next two questions - use your intuition) OBoth consumer A and B are savers OConsumer A is a borrower and consumer B is a saver ONone of these are true OBoth consumer A and B are borrowers OConsumer A is a saver and consumer B is a borrower (e) Keeping the new discount factor from the previous part, consumer B's income in period 1 drastically decreases so that y = 10. In the new equilibrium, which of the following is true? ONone of these are true OBoth consumer A and B are borrowers OConsumer A is a saver and consumer B is a borrower OConsumer A is a borrower and consumer B is a saver OBoth consumer A and B are saversFor the following questions assume that there are two consumers in an economy that each have utility function over consumption in two periods given by U(C1, C2) = In(c1) + BIn(c2) Consumers can only borrow from the other consumer and can only save by lending their income to the other consumer at interest rate r For now assume that B is equal to 1 for each consumer BA = BB = 1 Consumers have equal endowments in each period, which are given by y1 = y= 500 and y. = y? = 600