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Smith lives in a world with two time periods: current period and future period. His income in each period is $10,000. A) Draw his intertemporal budget constraint when the interest rate is 33%. B) If Smith consumes $10,000 in each period, show his best affordable bundle and the indifference curve that passes through it. C) Graphically show how Smith's current consumption changes when the interest rate falls to 0%.

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User Gijswijs
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Answer and Explanation:

Answer and explanation attached

Smith lives in a world with two time periods: current period and future period. His-example-1
Smith lives in a world with two time periods: current period and future period. His-example-2
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User Peter Fortuin
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