In the two-period model-suppose household income

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Reference no: EM131340656

In the two-period model, suppose a household's income in the first period is $40,000, income in the second period is $50,000, and the real interest rate is 25 percent. A sudden shock changes the household's income to $45,000 and income in the second period to $43,750. The household is ____ in the new situation.

a. better off

b. worse off

c. equally well off

d. possibly better off and possibly worse off

Reference no: EM131340656

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