+ B (15 points) Consider a single type of agent two-period model of consumption/saving decisions, with household lifetim

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B 15 Points Consider A Single Type Of Agent Two Period Model Of Consumption Saving Decisions With Household Lifetim 1 (214.96 KiB) Viewed 33 times

+ B (15 points) Consider a single type of agent two-period model of consumption/saving decisions, with household lifetime utility given by (c')l-o U = In(c) 1-0 where ß = 0.98 and o = 10. The household earns exogenous income y = 10 in the first period and y' = 11 in the second period, and can borrow and save at the real interest rate r. Savings/borrowing is denoted by s. Assume that there are no taxes. = (a) (2 points) Define an equilibrium. (b) (5 points) Compute the interest rate of equilibrium. (c) (5 points) Assume ß = 0.99, compute the interest rate of equilibrium. (d) (3 points) Assume y' = 12, compute the interest rate of equilibrium. = =