In the two-period model, suppose a household's income in the first period is $40,000, income in the second period is $50,000, and the real interest rate is 25 percent. A sudden shock changes the household's income to $45,000 and income in the second period to $43,750. The household is ____ in the new situation.
a. better off
b. worse off
c. equally well off
d. possibly better off and possibly worse off