Consider an individual who faces a fixed interest rate r= 0.10, and whose optimal consumption plan bundle

given the income stream = (1, 2) = (150, 400) would involve borrowing $100. How would their

consumption plan and saving/borrowing decision change if they faced the same interest rate, but instead

faced the income stream = (1, 2) = (200,345)? Briefly relate this to PIH and consumption smoothing