Budget constraints in two period model

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Reference no: EM1347663

Explain how the budget constraint of househould in two-period model is affected by each of the following changes. In each case, do you think the household is better off or worst off or is the answer ambiguous? If ambiguous, what does the answer depend on?

A. Period 1 income is lower
B. The interest rate is higher
C. Period 2 income is lower, and the interest rate is lower

Reference no: EM1347663

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