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Question
In a two-period model, a household has an income of $20,000 in period one and an income of $25,000 in period two.The household faces an interest rate of 50 percent. What is the present value of the household's income if the income in period one increases to $30,000?
a. $39,000
b. $46,666.66
c. $40,555.65
d. $50,000
Answer
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