Kathy is a forward-looking student who want to plan ahead for her future. She knows that her current income is I1 and his future income is I2. She also knows that she can borrow and lend at the interest rate of r.

a) Based on the information given, can you draw the budget constraint Kathy faces using C1-C2 plane, where Ci is the consumption in each period.

b) Let's assume that I1 = I2 =100 and r = 0.1 or 10%. If Kathy's utility function is U = C1*C2, will she save any money for her future? (Hint: Kathy can borrow money to increase her current consumption over her current income if she wants to.)

c) Does your answer change If Kathy's utility function is U = C1(1/2)*C2. If so, can you explain why?