Vanessa's Utility Function Is U(c¹, C²)= C^1/2₁ + 0

question 41

Multiple Choice

Vanessa's utility function is U(c¹, c²) = c^1/2₁ + 0.83c^1/2₂, 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