2. Economics
3. bob learns that his income in the second period of...

# Question: bob learns that his income in the second period of...

###### Question details

Bob learns that his income in the second period of this two period existence will now be \$100 greater than he previously expected. Assuming he perfectly smooths his consumption (so that consumption will be the same in both his periods), he isn't borrowing constrained, and the interest rate is 16%:

a) What will happen to his consumption in the future period?

b) what will happen to his savings in the current period?