A consumption smoothing practice question
c) (5 points) In steps Ben Bernanke and the Fed and they conduct massive amounts of open market purchases and get the real rate of interest all the way down to - .04 (negative 4%). Recalculate the optimal bundle for Homer and add this point to your graph and label as point C*C. (Note, point C*C incorporates the shock to Homer’s future income ... ................
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