Dr Issac Parish will live for two periods only. His utility function is U(c1, c2) = C1c2, where c, is consumption in period 1 and c2 is consumption in period 2. He will have no income in period 2. His income in period 1 is £40,000. If the interest rate rises from 10 to 14%: Select one: a. his savings will not change but his consumption in period 2 will increase by £800. O b. his consumption in both periods will decrease. c. his savings will increase by 4% and his consumption in period 2 will increase. O d. his consumption in period 1 will decrease by 14% and his consumption in period 2 will increase. e. his consumption in both periods will increase.

Dr Issac Parish will live for two periods only. His utility function is U(c1, c2) = C1c2, where c, is consumption in period 1 and c2 is consumption in period 2. He will have no income in period 2. His income in period 1 is £40,000. If the interest rate rises from 10 to 14%: Select one: a. his savings will not change but his consumption in period 2 will increase by £800. O b. his consumption in both periods will decrease. c. his savings will increase by 4% and his consumption in period 2 will increase. O d. his consumption in period 1 will decrease by 14% and his consumption in period 2 will increase. e. his consumption in both periods will increase.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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