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Suppose that you are making a choice between consumption in the present [this year} and consumption in the future [next year}. Denote the current and

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Suppose that you are making a choice between consumption in the present [this year} and consumption in the future [next year}. Denote the current and future consumption baskets as C1 and (:2. Assume that you receive all of the inco me, denoted by I, today {and you receiye nothing in the future}. The interest rate in the economy is r. f1 Propose a utility function that you think makes sense for a consumer to evaluate oonsumption in t=1 and t=2. What is the Marginal Rate of Substitution {MR5} between current and future consumption based on your utility function? Write down the [intertemporalt budget constraint. Now assume that you are very impatient: you very much prefer to consume today, rather than delaying your purchases to next year. How would you change the utility function to model this impatience? Do you this impatience is realistic as a model of human behayior':I

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