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In the two-period small open (endowment) economy model, when a household chooses to allocate ALL of its lifetime wealth to consumption in period 2 then
In the two-period small open (endowment) economy model, when a household chooses to allocate ALL of its lifetime wealth to consumption in period 2 then her consumption in period 2 (C2) must be equal to: (a) C2= (1 + 1,) Q1 + Q2 (b) C2= (1 + r,) (1 + ro)Bo + (1 + r,)Q1+ Q2 ( c ) C2= (1 + r, ) (1 + ro)Bo + Q1 + Q2 (d) C2 = ( 1 + r, ) ( 1 + ro)Bo + (1 + r1)Q2+ Q1 (e) None of the above Assume that B*O(the 0 should be lower)
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