Question
Michelle has an income of 400 in period one and 550 in period two. Her intertemporal consumption utility function is: U(C1,C2)=C1^0.5 C2^0.5 The interest rate
Michelle has an income of 400 in period one and 550 in period two. Her intertemporal consumption utility function is: U(C1,C2)=C1^0.5 C2^0.5 The interest rate drops from 10% to 8%, while income in both periods remains constant. which of the following statements would be correct? Michelle was a borrower in first period. A) Michelle will cease to be a borrower. b) Michelle's consumption in the first period is 526.41 c) The consumption in period 2 became more expensive relative to the consumption in period 1. c) The opportunity cost of the consumption of period 1 increases
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