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Function of consumption levels

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Consider a consumer who lives for two periods. His utility is a function of consumption levels in periods 1 and 2 and is given by ??(??1, ??2 ) = ??1??2. His income in periods 1 and 2 are given by ??1 = ??2 = ??, that is income is the same in both periods. Due to expansionary monetary policy the market interest rate is equal to 0. Will this consumer decide to borrow or lend in period 1? Demonstrate your answer.

Reference no: EM133063294

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