You live 2 periods. You are born with nothing and you must die with nothing.

In Period 1 you have labor income of 130.

In period 2 you have labor income of 230.

In both periods you may consume (Cl and C2) as well as buy or sell bonds (B).

Both earn an interest rate of 13%.

6a. Write out period 1's budget constraint using the notations and numbers ABOVE

6b. Write out period 2's budget constraint using the notations and numbers ABOVE

6c. DERIVE the 2 period budget constraint.

6d. If you consume 180 in period 2. What is consumption in period 1?

6e. James is awarded a prize of $1000 for best econ. student of the year. James will likely:

6f. Work: More or Less

6g. Change his Consumption: More or Less than the $1000 this year.

6h. James is given a raise of $13 an hour. Because of the raise he decides to work fewer shifts.

This suggests which effect dominated his decision.

Thank you and good luck../