Assume the representative consumer lives in tum periods and his preferences can be described a U(E.C'}=cm+(c')\"2. where c is the current consumption. c" is next period consumption. and ,3 = {1.95. Let's assume that the consumer can borrow or lend at the interest rate r = 19%. The consumer receives an income 3; = III! in the current period and y" = 110 in the next period. The government wants to spend G = 3D in the current period and G\" = 35 in the future period. 1. Solve the consumer's problem by nding the optimal allocations c" and c\". [11] points] Is the economyr at the equilibrium? Explain. [115 points] What are the equilibrium values of c and c\"? [[15 points] What is the equilibrium interest rate? [05 points] How will the equilibrium interest rate respond to an increase in G? [115 points] FinP-i-'FP How will the equilibrium interest rate respond to an increase in G"! [05 points]