Suppose that Meghan earns $2,000 this month, and $2,200 next
month
with a utility function over consumption in these two periods
given
by U(C1, C2) = C1C2, where MUC1 = C2 and MUC2 = C1. Suppose
that
the deposit interest rate is rL = 1%, while the credit
interest
rate is rB = 2% + x%, where x is 4.
a) Draw a graph with Meghan’s budget constraint for consumption in
this month
vs. next month.
b) Will Meghan borrow...