題組內容

3. Consider the following Irving Fisher’s two periods consumption model with the model
structures:
6178c0c1d1da8.jpg

where c1 and c2 represent the consumption of period 1 and period 2, respectively. Besides, β is
the time preference discount factor； R is the interest rate； f1 is financial wealth in period 1, and
y1 and y2 represent the human wealth of period 1 and period 2.

(C) Suppose the real interest rate increases from R to 2R, what happens to total wealth (=f1+y1+y2/(1+R)) and consumption of period1?