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Suppose that Amitsa has an income of $2000 this year and expects an income of $2500 next year. She can borrow and lend money at
Suppose that Amitsa has an income of $2000 this year and expects an income of $2500 next year. She can borrow and lend money at an interest rate of 10%. Assume no inflation and that consumption of goods costs $1 per unit.
Now suppose that Amitsa's utility function is U(C1,C2) = C1C2. How much will Amitsa consume in periods 1 and 2?
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