Awnser

Draw the following intertemporal budget constraints. Be sure to label the intercepts and the slope(s). a. If financial institutions operate in a way where the rate of borrowing is higher than the rate offered to lenders, i.e., rb > rl how would the budget constraint change. b. If financial institutions operate in imperfect credit markets such that they allow a borrower to borrow up to a maximum of 50% of her future income. c. If the government decides to offer a transfer subsidy TS1 in period one and impose a tax in period two such that T2 = TS1 x (1 + r)