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  3. 2 janes income today is io 1 and her income...

Question: 2 janes income today is io 1 and her income...

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2. Janes income today is Io 1 and her income tomorrow is 111. Janes util ity function over consumption is concave, so her indifference curves have the (normal) convex shapes. The interest rate is r. Suppose Jane can either borrow or save, and at her endowment, her MRS <1+r. Draw Janes in- difference curve and show her equilibrium consumption bundle for the two periods. Is Jane a borrower or a saver? Explain

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