Harper has an income of 100 units in period 1 and 200 units in period 2. Lily has an income of 200 units in period 1 and 100 units in period 2. Both can borrow or save at the interest rate r0, and both have discount factor

\beta= \frac{1}{1+r}.
This is the same two-period consumption problem studied in class; no change in the setup is intended.
Which of the following statements is correct?

Question

Harper has an income of 100 units in period 1 and 200 units in period 2. Lily has an income of 200 units in period 1 and 100 units in period 2. Both can borrow or save at the interest rate   r>0,  and both have discount factor  
 
      \beta= \frac{1}{1+r}.    
 This is the same two-period consumption problem studied in class; no change in the setup is intended. 
 Which of the following statements is correct?

Answer

Harper and Lily have the same consumption in period 2, but Lily consumes more than Harper in period 1.

Answer

Harper and Lily will have the exact same consumption plan.

Answer

Harper and Lily have the same consumption in period 1, but Lily consumes more than Harper in period 2.

Answer

Harper’s consumption is less than 150 in both periods, while Lily’s consumption is greater than 150 in both periods.

Crowdly

Harper has an income of 100 units in period 1 and 200 units in period 2. Lily ha...

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