3. (2) Oliver gets an allowance of $50 this week and $56 next week. Let c, and c₂ be his consumption (measured in units of stuff) this and next week correspondingly. The price of one unit of stuff this week is $5. Next week, the price will be $7 because of inflation. Assume that the interest rate i (both for borrowing and lending) is 0.05. Find the intertemporal budget constraint.

3. (2) Oliver gets an allowance of $50 this week and $56 next week. Let c, and c₂ be his consumption (measured in units of stuff) this and next week correspondingly. The price of one unit of stuff this week is $5. Next week, the price will be $7 because of inflation. Assume that the interest rate i (both for borrowing and lending) is 0.05. Find the intertemporal budget constraint.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 34P: The total price of purchasing a basket of goods in the United Kingdom over four years is: year...

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