Compute what will happen to his consumption levels in period

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Reference no: EM1363313

Hayden will live for exactly two periods. 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 $80,000. If the interest rate rises from 10 to 12%, calculate what will happen to his consumption levels in period 1 and 2.

Reference no: EM1363313

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