An individual's current income is $50,000 the person expects next period (future) income to be $50,000 as shown in the diagram to the right. 1.) Using the line drawing tool, draw the budget constraint for a real interest rate of 0%. Label this line 'Budget- 2.) Using the line drawing tool, draw the budget constraint for an increase in the interest rate above 0%. Label this line 'Budget₁'. Carefully follow the instructions above, and only draw the required objects. 160- 150- 140- 130- 120- 110- 100- 90- 80- 70- Future Consumption (000)

An individual's current income is $50,000 the person expects next period (future) income to be $50,000 as shown in the diagram to the right. 1.) Using the line drawing tool, draw the budget constraint for a real interest rate of 0%. Label this line 'Budget- 2.) Using the line drawing tool, draw the budget constraint for an increase in the interest rate above 0%. Label this line 'Budget₁'. Carefully follow the instructions above, and only draw the required objects. 160- 150- 140- 130- 120- 110- 100- 90- 80- 70- Future Consumption (000)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.8P

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