HOMEWORK 3 Due by Tuesday, November 3, in class Note: I will not accept any homework submitted after 12:30pm on Tuesday, November 3. 1. What does the...

solve some questions in this files. such as A consumer receives income y in the current period, income y0in the future period, andpays taxes of t and t0in the current and future periods, respectively. The consumercan borrow or lend at the real interest rate r. This consumer faces a constraint on howmuch he or she can borrow, much like the credit limit typically placed on a credit cardaccount. That is, the consumer cannot borrow more than x, where x we−y +t, withwe denoting lifetime wealth. Use diagrams to determine the effects on the consumer’s current consumption, future consumption, and savings of an increase in x, and explain your results.