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: O 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.

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: O 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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: O a. his savings will not change but his consumption in period 2 will increase by £800. b. his consumption in both periods will decrease. c. his savings will increase by 4% and his consumption in period 2 will increase. O d. his consumption in period 1 will decrease by 14% and his consumption in period 2 will increase. e. his consumption in both periods will increase.
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