1. Abby lives and works for two periods. In the first period, she earns 1,000 coconuts while in the second she earns 2,200 coconuts. Abby can save or borrow from a bank at the same interest rate of 10%. However, because the bank cannot get Abby to commit that she will pay them back, to agree to lend they ask her to post collateral. Thankfully, Abby owns a 550sq.ft. apartment, priced at 2 coconuts per square foot. She cannot sell it in the first period because she needs a place to stay in the second, but she can borrow against it and sell it in the second.
   1. In a graph that has future consumption on the vertical axis and current consumption on the horizontal, draw her lifetime budget constraint. Make sure to compute and show the coordinates of the vertical and horizontal intercepts as well as those of the endowment point (which in the second period should include her house).
   2. Suppose that Abby would like to consume ideally 2,200 coconuts in the second period. Find how many coconuts she can consume in the first, and draw an indifference curve to show her optimal consumption point on the graph (show coordinates). Is she a borrower or lender, and by how much?
   3. Suppose that the housing marker collapses and the price of housing drops to 1 coconut per sq. foot. Draw her new lifetime budget constraint including her endowment point. As before, make sure to show the coordinates.
   4. Suppose that Abby tries to get as close to her previous consumption as possible. Find how many coconuts she can consume in the first period if she continues to consume 2,200 in the second and use an indifference curve to show her new consumption point on the graph.
   5. Describe the impact of the housing market collapse on Abbys current consumption, borrowing, and welfare and explain what caused it.