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## fo… Show more Suppose a person’s preferences are to “consu

Paper help Economics fo… Show more Suppose a person’s preferences are to “consu

# fo… Show more Suppose a person’s preferences are to “consu

fo… Show more Suppose a person’s preferences are to “consumption smooth,” which means they wish to get C1 = C2 for all incomes and interest rates. For any interest rate and Y1 = Y2, the person will ____ in the first period. A) borrow B) save C) neither borrow nor save D) both borrow and save Draw a two period budget line where the borrow/lending rate of interest, r, allows consumers to choose consumption in each of the two periods. C1 and C2 given their anticipated income on two periods, Y1 and Y2. The slope is A) r B) -r C) -(1 + r) Suppose Johnny Stroller sells 12, 25, and 75 year-old scotch in under black, red, and blue labels. Suppose the storage costs are zero and the initial production costs are the same. What is the implied (approximate) interest rate if black sells for \$18, red for \$34 and blue for \$388. A) 2 B) 5 C) 10 Suppose a person’s preferences are to “consumption smooth,” which means they wish to get C1 = C2 for all incomes and interest rates. For any interest rate and Y1 > Y2, the person will ____ in the first period. A) borrow B) save C) neither borrow nor save • Show less

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