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Two period Model With Uncertainty Given an economy in which all identical consumers have preferences represented by u(C1, Cz, C2) = In(c) + B[m, In(cz)

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Two period Model With Uncertainty Given an economy in which all identical consumers have preferences represented by u(C1, Cz, C2) = In(c) + B[m, In(cz) + (1 - m) In(cz )], B = 0.95, y1 = 10, yz = 8, y- = 14, 1 = 0.5. Solve for the following values: a. S1 b. r c. Suppose we a different value for r than we just solved for, e.g. r = 0.05. What would that imply? How would s change?' (Assuming the rest of the model stayed the same.) d. How would r change if yz = 6, y? = 16, my = 0.5 (assuming the rest of the model stayed the same)

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