Question
The following diagram depicts Julia's choice of consumption in periods 1 (now) and 2 (later)when the interest rate is 78%. She has no income in
The following diagram depicts Julia's choice of consumption in periods 1 (now) and 2 (later)when the interest rate is 78%. She has no income in period 1 and an income of $100 in period2. She chooses the consumption choice G. Based on this information, which of the following statements regarding Julia's balance sheet is correct?
A. The asset after borrowing but before consumption in period 1 is 56. B. The net worth after consumption in period 1 is 0. C. The liability before consumption in period 2 is 35. D. The asset after consumption but before repaying the loan in period 2 is 62.
Julia's 100 status quo Feasible consumption frontier (78% interest rate) Consumption later ($) G 38 Julia's indifference curve (lower utility) 0 - 0 35 56 Consumption now ($)Step by Step Solution
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