Suppose that you eam $250 in year 1 and will ean $448 in year 2. If you borrow money against your future income you will haveand additional $400 to spend in year 1, and If you lend all of your current income you will have and additional $280 to spend inyear 2. In both years you consume only food which costs $1 per kilogram in each year.What is the interest rate that you borrow and lend at?R=F2where F is the amount of food consumed thisF1Let your MRS for food in year 1 with food in year 2 be given by the formulayear and Fo is the amount of food consumed next year.Calculate your consumption bundie:F1 =F2 =%3!Suppose the interest rate at which you can borrow and lend changes to 40%.Calculate your new consumption bundle:%3DWhich interest rate is preferred?O The initial interest rate found in part 1The new interest rate, 40%

Given information: Earning in Year 1 = $250Earning in Year 2 = $448 If money is borrowed against…

Suppose that you eam $250 in year 1 and will eam $448 in year 2. If you borrow mòney against your future income you will have and additional $400 to spend in year 1, and if you lend all of your current income you will have and additional $280 to spend in year 2. In both years you consume only food which costs $1 per kilogram in each year. What is the interest rate that you borrow and lend at? R= %3D F2 Let your MRS for food in year 1 with tood in year 2 be given by the formula where F is the amount of food consumed this F1 year and F2 is the amount of food consumed next year. Calculate your consumption bundle: F = F2 = Suppose the interest rate at which you can borrow and lend changes to 40%. Calculate your new consumption bundle: F = F2 Which interest rate is preferred? The initial interest rate found in part 1 O The new interest rate, 40%

Suppose that you eam $250 in year 1 and will eam $448 in year 2. If you borrow mòney against your future income you will have and additional $400 to spend in year 1, and if you lend all of your current income you will have and additional $280 to spend in year 2. In both years you consume only food which costs $1 per kilogram in each year. What is the interest rate that you borrow and lend at? R= %3D F2 Let your MRS for food in year 1 with tood in year 2 be given by the formula where F is the amount of food consumed this F1 year and F2 is the amount of food consumed next year. Calculate your consumption bundle: F = F2 = Suppose the interest rate at which you can borrow and lend changes to 40%. Calculate your new consumption bundle: F = F2 Which interest rate is preferred? The initial interest rate found in part 1 O The new interest rate, 40%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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