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How to solve this question:
Patience has a utility function U(c1,c2) = c
1/2
1 + 0.83c
1/2
2 , c1 is her
consumption in period 1 and c2 is her consumption in period 2. Her
income in period 1 is 2 times as large as her income in period 2. At what
interest rate will she choose to consume the same amount in period 1 as
in period 2?
(a) 0.40
(b) 0.10
(c) 0.20
(d) 0
(e) 0.30
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Locked
