Consider the following diagram: FF (10% interest rate) FF (78% interest rate) Julia's 100 endowment 38 36 Julia's IC (higher utility) Julia's IC Julia's IC (through point F) Julia's IC (lower utility) 35 56 58 91 Consumption now (S) Select one or more: O a. If the interest rate is 10%, Julia will choose to borrow £91. O b. If the interest rate is 10%, Julia could borrow up to £91. O c. If the interest rate is 10%, Julia will need to pay the bank £58 in the second period. O d. If the interest rate is 78%, she will need to pay the bank $62, to the nearest dollar. Consumption later ($)
Consider the following diagram: FF (10% interest rate) FF (78% interest rate) Julia's 100 endowment 38 36 Julia's IC (higher utility) Julia's IC Julia's IC (through point F) Julia's IC (lower utility) 35 56 58 91 Consumption now (S) Select one or more: O a. If the interest rate is 10%, Julia will choose to borrow £91. O b. If the interest rate is 10%, Julia could borrow up to £91. O c. If the interest rate is 10%, Julia will need to pay the bank £58 in the second period. O d. If the interest rate is 78%, she will need to pay the bank $62, to the nearest dollar. Consumption later ($)
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.2P
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