Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

need urgent answer 2. {20 marks) Marie, who earns $2000 this month and $3000 the next month, has a utilityF function given by U'eu,cl]=else where

need urgent answer

image text in transcribed
2. {20 marks) Marie, who earns $2000 this month and $3000 the next month, has a utilityF function given by U'eu,cl]=else where Cu is the value of consumption this month and C1 is the value of consumption next month. Marie's marginal utilities are MU0=C1 and MUI=Cu. Suppose the interest rate for borrowing is equal to the deposit rate of 10%. a. Draw the graph of Marie's intertemporal budget line. What is the slope? b. Will Marie borrow this month? e. Now, assume that the deposit rate is 10%, but the borrowing rate is 20%. IfMarie's utility function is as in part a), U [ca,c1]=c1*cn, draw the new budget line and decide if Marie will borrow, lend, or do neither. d. What if the rate to borrow was 7.5% and deposit rate is 5%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Marketing And Export Management

Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr

8th Edition

1292016922, 978-1292016924

Students also viewed these Economics questions

Question

What opportunities exist for raises and advancement?

Answered: 1 week ago

Question

Determine miller indices of plane A Z a/2 X a/2 a/2 Y

Answered: 1 week ago