Vanessa's Utility Function Is , Where C₁ Is Her

question 7

Multiple Choice

Vanessa'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 4 times 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) 0.10
• B) 0
• C) 0.30
• D) 0.80
• E) 0.20

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