Will Wisp will live for exactly two periods. His utility function is U(c₁, c₂) = c₁c₂, where c₁ is consumption in period 1 and c₂ is consumption in period 2. He will have no income in period 2. His income in period 1 is $40,000. If the interest rate rises from 10 to 14%: A) his savings will increase by 4% and his consumption in period 2 will increase. B) his consumption in both periods will increase. C) his consumption in both periods will decrease. D) his savings will not change but his consumption in period 2 will increase by $800. E) his consumption in period 1 will decrease by 14% and his consumption in period 2 will increase.

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The Answer of Will Wisp will live for exactly two periods. His utility function is U(c₁, c₂) = c₁c₂, where c₁ is consumption in period 1 and c₂ is consumption in period 2. He will have no income in period 2. His income in period 1 is $40,000. If the interest rate rises from 10 to 14%: A) his savings will increase by 4% and his consumption in period 2 will increase. B) his consumption in both periods will increase. C) his consumption in both periods will decrease. D) his savings will not change but his consumption in period 2 will increase by $800. E) his consumption in period 1 will decrease by 14% and his consumption in period 2 will increase.

Will Wisp Will Live for Exactly Two Periods