Nicki lives in two periods and has a utility function u(c1, c2 ) = c1xc2, where c1 is her consumption in period 1, and c2 is her consumption in period 2. Nicki's income in period 1 (I1) is $400, and her income in period 2 (I2) is $220. She can borrow or lend at an interest rate of 10%.
Now suppose Nicki has the same endowment (I1,I2 ) in both periods. But the interest rate rises to 50%. In the same graph, draw Nicki's new inter temporal budget constraint.