Optimal decisions

by | Aug 22, 2021 | Assignment

(a) Formulate the consumer problem and solve for the optimal decisions: c, c? and s. Show your work. (b) Looking at the case of a net borrower, what do we have to assume about the substitution and income effects to generate the result that a decrease in r brings about an increase in current-period consumption? Explain your answer. (c) Use graphs and finish with concluding sentence to answer the following questions:

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