Suppose That Molly Had an Income of $500 in Period

Multiple Choice

Suppose that Molly had an income of $500 in period 1 and an income of $250 in period 2.Suppose that her utility function were c^a₁c^1-a₂, where a = 0.60 and the interest rate were 25%.If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would

A) double.
B) increase by $300.
C) increase by $150.
D) stay constant.
E) increase by $500.