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12. Savings decisions Jacques is a tenured faculty member who teaches astrophysics at a university where he eams an annual salary of $80,000. He intends to take the next year off to focus on writing a new undergraduate physics textbook, so he will not earn any income next year. He is currenty deciding how much of this year's salary he should save for next year, Assume that there are no tax implications associated with the decision, and ignore what happens after next year. Therefore, next year Jacques will consume whatever he saves this year plus interest, and he is not concerned with the future beyond next year The following graph shows Jocques's preferences for consumption this year and next year. Suppose initially Jacques cannot earn interest on the money he saves. Use the green line (triangle symbol) to plot Jacques's budget constraint (BC1 ) an the following graph. Then ise the black point (olus symbol) to show his optimum considnption bundle. Note: Dashed drop lines will automatically extend to both axes, CONSUMPTION NEXT YEAR (Thousands of dollars) Use the blue line (circle symbol) to plot his new budget constraint (BC2) on the previous graph. Then use the grey point (star symbol) to plot his optimum consumption bundle at this interest rate. (Hint: To plot BC2, think about how much money Jacques would have next year if he saved his entire income this yeari) Using the previous graph, complete the following table by indicating how much Jacques should save of his current income when he cannot earn any interest on his savings and when he can earn 50% interest on his savings. interest on his savings and when he can earn 50% interest on his saving5. Which of the following statements is a good description of the results of this exercise, as well as its implications for broader consumer behavior? In this case, lacques saves more money when interest rates are high. However, consumers with different preferences might save less money when interest rates are high. All consumers, including Jacques, save more money when interest rates are high, because they get a higher return on that investment. In this case, Jacques saves less money when interest rates are high. However, consumers with different preferences might save more money when interest rates are high. All consumers, including Jacques, save less money when interest rates are high, becouse they don't need to save as much money to have. the same future income