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An employer oers his or her employee the option of shifting x units of income from...

An employer oers his or her employee the option of
shifting x units of income from next year to this year. That is, the option is to reduce income next year by
x units and increase income this year by x units.
(a) Would the employee take this option? Use a life-cycle diagram to show why or why not (hint: how is
the budget constraint affected, and would a higher indiference curve be attained?)
(b) Determine, again using a diagram, how this shift in income will affect consumption this year and next
year, and saving this year. Explain your answer.
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