Question

Consider a two-period model in which the consumer chooses consumption today (c), consumption tomorrow (c') and savings (s > 0) or borrowing (s < 0) to solve the problem below. maxU(c,c') subject to: c + s = y and c' = y' + (1+r)*s Let y = 5.1 and y' = 7.8. Let the net interest rate be r = 4 percent. Keeping in mind that the slope of the budget constraint is negative, answer the questions in parts a) and b). For part a) report 2 decimal places. a). The slope of the lifetime budget constraint of the consumer is . b). If the net interest rate increases, the budget constraint A. becomes flatter B. becomes steeper C. remains unchanged

          Consider a two-period model in which the consumer chooses consumption today (c), consumption tomorrow (c') and savings (s > 0) or borrowing (s < 0) to solve the problem below.

maxU(c,c')
subject to: c + s = y
and c' = y' + (1+r)*s

Let y = 5.1 and y' = 7.8. Let the net interest rate be r = 4 percent. Keeping in mind that the slope of the budget constraint is negative, answer the questions in parts a) and b). For part a) report 2 decimal places.

a). The slope of the lifetime budget constraint of the consumer is .

b). If the net interest rate increases, the budget constraint

A. becomes flatter
B. becomes steeper
C. remains unchanged

Consider a two-period model in which the consumer chooses consumption today (c), consumption tomorrow (c') and savings (s > 0) or borrowing (s < 0) to solve the problem below.

maxU(c,c')
subject to: c + s = y
and c' = y' + (1+r)*s

Let y = 5.1 and y' = 7.8. Let the net interest rate be r = 4 percent. Keeping in mind that the slope of the budget constraint is negative, answer the questions in parts a) and b). For part a) report 2 decimal places.

a). The slope of the lifetime budget constraint of the consumer is .

b). If the net interest rate increases, the budget constraint

A. becomes flatter
B. becomes steeper
C. remains unchanged

Added by Jose Maria A.

Question

Please give Ace some feedback