The Maxwell School
Syracuse University
Syracuse University
Given:
A household has Cobb-Douglas preferences with U=C0^0.5*C1^0.5
Its demands for C0 and C1 are: C0 = 0.5*PVI/1 and C1 = 0.5*PVI/(1/(1+r))
The household can borrow or save at an interest rate of 100% (to keep the calculation simple)
The household's income is $100K in period 0 and $0 in period 1.
Determine:
The amount the household consumes in period 1.