Holly's Utility Function Is , Where C₁ Is Her

question 9

Multiple Choice

Holly's utility function is , where c₁ is her consumption in period 1 and c₂ is her consumption in period 2. In period 2, her income is twice as large as her income in period 1. At what interest rate will she choose to consume the same amount in period 2 as in period 1? (Choose the closest answer.)

• A) 0.30
• B) 0.08
• C) 0.23
• D) 0
• E) 0.15

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Problem Solving Process

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