申論題

1.Consider a two-period endowment model with income (y and y') and the consumer pays lump-sum tax (t and t') in the current and future period, respectively. The consumer chooses consumption (C and C') in the current and future periods, and saving (s) in the current period. The real interest rate is r. Consider that a representative consumer lives in this two-period economy and has a convex preference over the current and future consumption. [50 pts]

(b) Use the graphical approach to show the optimal consumption/saving bundle for the consumer to be a lender. The figure should have C' on the vertical axis and C on the horizontal axis. It should also contain the lifetime budget of the consumers, and the indifference curve (IC). Make sure you mark the slope of the budget line, its endpoints, the endowment point, the equilibrium current and future consumption (C* and C'*), and the equilibrium saving (s*). [10 pts]