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GRAPHICALLY: INCOME LEVELS AND CONSUMTION ----- WITHOUT « LIQUIDITY CONSTRAINTS » OR « CREDIT/BORROWING CONSTRAINTS ». C [1]. Lw [1]. Lw [0]. C [0]. THE INTERTEMPORAL BUDGET CONSTRAINT. C [1]. Lw [1]. 1+ r. Lw [0]. C [0]. INTERTEMPORAL UTILITY MAXIMIZATION. C [1]. Lw [1]. 1+ r.

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  1. GRAPHICALLY: INCOME LEVELS AND CONSUMTION ----- WITHOUT « LIQUIDITY CONSTRAINTS » OR « CREDIT/BORROWING CONSTRAINTS » C[1] Lw[1] Lw[0] C[0]

  2. THE INTERTEMPORAL BUDGET CONSTRAINT C[1] Lw[1] 1+r Lw[0] C[0]

  3. INTERTEMPORAL UTILITY MAXIMIZATION C[1] Lw[1] 1+r Lw[0] C[0]

  4. C[1] Lw[1] C[1] 1+r C[0] Lw[0] C[0]

  5. BORROWING FOR CURRENT CONSUMPTION C[1] Lw[1] REPAY C[1] BORROW 1+r C[0] Lw[0] C[0]

  6. GRAPHICALLY: INCOME LEVELS AND CONSUMTION ----- WITH « LIQUIDITY CONSTRAINTS » OR « CREDIT/BORROWING CONSTRAINTS » C[1] Lw[1] Lw[0] C[0]

  7. THE NEW INTERTEMPORAL BUDGET CONSTRAINT C[1] Lw[1] 1+r Lw[0] C[0]

  8. INTERTEMPORAL UTILITY MAXIMIZATION WITH NEW BUDGET CONSTRAINT C[1] Lw[1] 1+r Lw[0] C[0]

  9. INTERTEMPORAL UTILITY MAXIMIZATION C[1] Lw[1] 1+r Lw[0] C[0]

  10. INCOME AND CONSUMPTION WITHOUT BORROWING CONSTRAINTS CONSUMPTION PERMANENT INCOME TEMPORARY INCOME INCOME

  11. INCOME AND CONSUMPTION WITH BORROWING CONSTRAINTS CONSUMPTION TEMPORARY INCOME INCOME

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