Suppose that there are only 10 individuals in the economy each with the following utility function over present and future consumption: U(c1,c2)=c1+(2/3)*c2, where c1 is consumption today, and c2 is consumption tomorrow. Consumption tomorrow is less valued because people are impatient and prefer consuming now rather than later. Buying 1 unit of consumption today costs $1 today and buying 1 unit of consumption tomorrow costs $1 tomorrow. Suppose that in an economy all the funds for capital come from savings by the 10 individuals. Firms' demand for capital is given byQD=100100r.

What is the market supply for funds if the interest rate is 30%?, What is the market supply for funds if the interest rate is 70%?, What is the equilibrium interest rate that clears the capital market?, What is aggregate consumption in each period (C1 and C2) at that interest rate?