7. Mr. C lives for 2 periods, today and tomorrow. He consumes only bananas. He is endowed with 50 bananas today and 50 bananas tomorrow. There is no risk, and he can borrow and lend at the same interest rate, but has no investment opportunities. At the current interest rate he neither borrows or lends. (a) Write and draw his inter-temporal budget constraint and optimum. (b) Will a fall (rise) in the rate of interest make Mr. C better off?

7. Mr. C lives for 2 periods, today and tomorrow. He consumes only bananas. He is endowed with 50 bananas today and 50 bananas tomorrow. There is no risk, and he can borrow and lend at the same interest rate, but has no investment opportunities. At the current interest rate he neither borrows or lends. (a) Write and draw his inter-temporal budget constraint and optimum. (b) Will a fall (rise) in the rate of interest make Mr. C better off?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 3SCQ: Calculate the equity each of these people has in his or her home: Fred just bought a house for...

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