a. Jill's intertemporal budget constraint:

C1 + C2/(1+r) = Y1 + Y2/(1+r)

100 + 100/(1+r) = 210/(1+r)

100 = 110/(1+r)

1 + r = 110/100 = 1.1

r= .1 or 10%

b. Since Jack is not a saver nor a borrower, the increase in the interest rate has no income effect. The substitution effect implies that Jack's consumption in the first period will decrease. He is better off than before the interest rate rises.

c. Since Jill is a borrower, the increase in the interest rate lowers her ability to borrow, so her consumption in the first period decreases both due to the income and substitution effect. She is worse off than before the interest rate rises.