Patience Has a Utility Function U(c₁, C₂)=c^1/2₁

question 7

Multiple Choice

Patience has a utility function U(c₁, c₂) =c^1/2₁ +.080c^1/2₂, where c₁ is her consumption in period 1 and c₂ is her consumption in period 2.Her income in period 1 is 3 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)0.75
• B)0.13
• C)0.25
• D)0
• E)0.38

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Definitions:

Reconstruction Policy

The set of strategies implemented by the U.S. government from 1865 to 1877 aimed at rebuilding and reintegrating the Southern states after the Civil War and addressing the status of the freed slaves.

Equal Protection

A principle under the Fourteenth Amendment of the U.S. Constitution guaranteeing that no state will deny any person within its jurisdiction the equal protection of the laws.

Amendment

A formal change or addition to a legal or statutory document.

Reconstruction Plan

Relates to the strategies and policies implemented to rebuild and reorganize the Southern United States after the Civil War.