7. A ___________ is a financial contract: a borrower agrees to repay the amount that was borrowed and also a rate of interest over a period of time in the future.

a. bank loan

b. bond

Booster class

Microeconomics

Skill

Understanding How Businesses Raise Financial Capital

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Raushan RajLv8

2 Nov 2020

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A consumerâs income in the current period is y1= 170 and income in the future period is y2 = 150. He pays lump-sum taxes t1 = 20 in the current period and t2 = 7 in the future period. The real interest rate is 10% every period.Suppose that current and future consumption are perfect complements for the consumer and he wants to have equal consumption in the current and future periods. Determine the consumerâs optimal consumption bundle (C1, C2). Is he a saver or a borrower?