Elijah has a utility function U(c1, c2) = min{c1, c2}, where cl and c2 are his consumption in periods 1 and 2 respectively. Elijah earns £190 in period 1 and he will earn £70 in period 2. Elijah can borrow or lend at an interest rate of 5%. There is no inflation. Select one: O a. Elijah will save about £58.53. O b. Elijah will save about £61.46. O c. None of the above. O d. Elijah will neither borrow nor lend. O e. Elijah will borrow about £58.53.
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- I always thought my good friend Rado Coetzee was quite original given his choices. He then once told me his utility function was U(c1,c2) = min {c1,C2} where c1 and c2 are his consumption in period 1 and 2 respectively. I know in the first period he earns $105 thousand and $168 thousand in period 2. Rado can borrow or lend at an interest rate of 10%. Inflation is negligible. What will he do? a) Rado will borrow 30 thousand dollars b) Rado will save 133 thousand dollars c) Rado will save 30 thousand dollars d) Rado will save all his money, buy a BMW X5 in Luxembourg, tax free, and never let his wife Inga drive it. e) None of the aboveSuppose that the typical consumer has a salary of $30,000 in 2017. His salary grows by 2% per year. What can we say about his ability to pay for his consumption basket over time?This person earns $1000 of income today and $2000 income next year. Point C represents his consumption if he doesn't borrow or lend. If the interest rate is 10%, his Consumption This Year at Point B is? Round your answer to the nearest dollar. Consumption Next Year
- Patience has a utility function where c₁ is her consumption in period 1 and c2 is her consumption in period 2. Her income in period 1 is 3 times as large as her income in period 2. At what interest rate will she choose to consume the same amount in period 1 as in period 2? 20% 13% 25% 1/2 1/2 U(c1, c2) = ¹/² +0.80c¹/² 0% 80%Suppose Eleanor is a sports fan and buys only baseball caps. Eleanor deposits $3,000 in a bank account that pays an annual nominal interest rate of 15%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a baseball cap is priced at $15.00. Initially, the purchasing power of Eleanor's $3,000 deposit is baseball caps.Find the value of saving when the consumption is given as $413 and the income is $511
- Dr Issac Parish will live for two periods only. His utility function is U(c1, c2) = c1c2, where c1 is consumption in period 1 and c2 is consumption in period 2. He will have no income in period 2. His income in period 1 is £40,000. If the interest rate rises from 10 to 14%: Select one: a. his savings will not change but his consumption in period 2 will increase by £800. b. his savings will increase by 4% and his consumption in period 2 will increase. c. his consumption in period 1 will decrease by 14% and his consumption in period 2 will increase. d. his consumption in both periods will decrease. e. his consumption in both periods will increase.Suppose you have a monthly income of $1000, $850 in monthly expenses, and you can put money in a savings account that yields a monthly interest rate of 4%. Now suppose you have an opportunity to invest your money at a 12% return. Further suppose you are able to borrow at 3%. Assuming you invest all of your money and then borrow against your future payout, show your trade-off between present and future consumption. If you still need to consume $850 in the present, how much will you have to spend in the future?This person earns $1000 of income today and $2000 income next year. Point C represents his consumption if he doesn't borrow or lend. If the interest rate is 10%, his Consumption Next Year at Point A is? Consumption Next Year B Consumption Today