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Consider a consumer, Flo, that enjoys consumption in this period C, and next period C, only. They have the utility function U(C, C)=(C-2)(C-2). The MU

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Consider a consumer, Flo, that enjoys consumption in this period C, and next period C, only. They have the utility function U(C, C)=(C-2)(C-2). The MU =C -2 and MU =C -2. The price for a unit of the consumption good is 10 and is the same in both periods. Flo earns 1500 this year and 400 next year and the interest rate 1s 20%. What 1s Flo's optimal consumption in each period and saving/borrowing decision? Suppose now the interest rate is 10%, how does that affect Flo's saving/borrowing decision? (10 Marks)

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