Harvey Habit Has a Utility Function U(c₁, C₂)=min{c₁, C₂}, Where

question 11

Multiple Choice

Harvey Habit has a utility function U(c₁, c₂) =min{c₁, c₂}, where c₁ and c₂ are his consumption in periods 1 and 2 respectively.Harvey earns $189 in period 1 and he will earn $63 in period 2.Harvey can borrow or lend at an interest rate of 10%.There is no inflation.

• A)Harvey will save $60.
• B)Harvey will borrow $60.
• C)Harvey will neither borrow nor lend.
• D)Harvey will save $124.
• E)None of the above.