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Gal is an expert financial adviser. She is advising a small investor, Mrs. Johns, with the following preferences for consumption over time: U(c1, c2) =
Gal is an expert financial adviser. She is advising a small investor, Mrs. Johns, with the following preferences for consumption over time: U(c1, c2) = 2c1 + c2 where c1 is consumption in the first period and c2 is consumption in the second period. If the real interest rate is 70%, then Gal should tell Mrs. Johns to: A. consume only in period 1. B. consume only in period 2. C. consume equal amounts in each period. D. consume in period 1 and 2 in arbitrary amounts. E. None of the above
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