Suppose That Molly from Problem 2 Had an Income of $600

Multiple Choice

Suppose that Molly from Problem 2 had an income of $600 in period 1 and an income of $880 in period 2. Suppose that her utility function were c^a₁c^1-a₂, where a = 0.80 and the interest rate were 10%. If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would

A) increase by $240.
B) stay constant.
C) double.
D) increase by $480.
E) increase by $600.