When the fed uses expansionary monetary policy, which of the following is true? a. consumer spending and autonomous government spending increase while investment spending decreases. by. consumer spending, investment spending, and autonomous government spending decrease. c. interest-sensitive consumer spending, investment spending, and autonomous government spending increase. d. interest-sensitive consumer spending, investment spending, and autonomous government spending increase while net exports decrease, due to the change in the value of the dollar. e. interest-sensitive consumer spending, investment spending, and autonomous government spending decrease while net exports increase due to the change in the price level.

3. saving two consumers, larry and jeff, have utility functions defined over the two periods of their lives: middle age (period zero) and retirement (period 1). they have the same income in period 0 of m dollars and they will not earn income in period 1. the interest rate they face is r. larry’s and jeff’s utility functions are as follow. = 0.5 + 0.5 and = 0.5 + 0.5 for each person is between zero and one and represents each consumer’s temporal discount econ 340: intermediate microeconomics. ben van kammen: purdue university. rate. a. write the budget constraint that applies to both jeff and larry in terms of consumption in each period and ), interest rate, and m. b. what is larry’s and what is jeff’s marginal rate of intertemporal substitution? c. what is the slope of the budget constraint? d. write each consumer’s condition for lifetime utility maximization. e. re-arrange the conditions from part (d) to solve for the ratio, . f. if > which consumer will save more of his middle age income? g. if > 1 1+ , in which period will larry consume more: = 0 or = 1?