Consider a two-period economy. An agent's preferences for consumption at time t are represented by a CRRA utility function with coefficient of relative risk aversion equal to 1. The consumer maximizes u(ca) + E1u(c2), with subjective discount factor 8 = 0.9. The agent has an endowment eg = 10 at time 1

and a stochastic endowment ez at time 2, with Eye2 = 10.

a) Suppose in the economy there is a risk free asset with R = 1

0.0• Does the

agent save a strictly positive amount at time 1?

b) Does the result you obtained in part a) hold for any risk averse prefer-ences?