In an isolated mountain village, the harvest this year is 6,000 bushels of grain and the harvest next year will be 900 bushels.The villagers all have utility functions U(c1, c2)= c1c2, where c1 is consumption this year and c2 is consumption next year.Rats eat 40% of any grain that is stored for a year.How much grain could the villagers consume next year if they consume 1,000 bushels of grain this year?

A) 5,850 bushels B) 3,000 bushels C) 3,900 bushels D) 6,900 bushels E) 1,000 bushels A) 5,850 bushels B) 3,000 bushels C) 3,900 bushels D) 6,900 bushels E) 1,000 bushels

In an isolated mountain village, the harvest this year is 3,000 bushels of grain and the harvest next year will be 1,100 bushels.The villagers all have utility functions U(c1, c2)= c1c2, where c1 is consumption this year and c2 is consumption next year.Rats eat 10% of any grain that is stored for a year.How much grain could the villagers consume next year if they consume 1,000 bushels of grain this year?

A) 2,900 bushels B) 1,800 bushels C) 4,100 bushels D) 4,350 bushels E) 1,200 bushels A) 2,900 bushels B) 1,800 bushels C) 4,100 bushels D) 4,350 bushels E) 1,200 bushels

Exam 9: Intertemporal Choice-Part A

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Susan is a net borrower when the interest rate is 10% and a net saver when the interest rate is 20%.A decrease in the interest rate from 20% to 10% may make Susan worse off.

(True/False)

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Question 21

If the interest rate is less than the inflation rate, a rational person will never save money.

(True/False)

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Question 22

Molly has income $200 in period 1 and income $920 in period 2.Her utility function is c^a₁c¹^-^a₂, where a = 0.80 and the interest rate is 0.15.If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would

(Multiple Choice)

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Question 23

Buzz is a chicken farmer.His earnings will be $100 this year and $100 next year.He can lend money at an interest rate of 20%.Because of a subsidized loan program for chicken farmers, he can borrow money at an interest rate of 10%.No matter what he borrows or lends, his earnings will still be $100 each year. a.If he is not allowed to either borrow or lend, draw a graph showing his budget between consumption this year and consumption next year.Put numerical labels on the vertical and horizontal intercepts of the budget set. b.Suppose that Buzz is allowed to borrow up to the present value of next year's earnings at 10% and is also allowed to make loans.Draw Buzz's budget constraint in this case.

(Essay)

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Question 24

A newspaper article claims that more students are choosing 1-year M.B.A.programs instead of 2-year programs because the 2-year programs no longer guarantee a well-paid job.If the length of your M.B.A.program doesn't matter to employers, and you take a job right after completing your M.B.A., the present value of your lifetime earnings is the same whether you take a 1-year or 2-year program.

(True/False)

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Question 25

Roger's utility function is U = min{a₁, a₂} min{b₁, b₂}, where a₁ and a₂ are the number of piano lessons he consumes this year and next and b₁ and b₂ are the number of ice skating lessons he consumes this year and next.The price of piano lessons is $10 each and the price of ice skating lessons is $4 each.The prices won't change, but the interest rate is 7%.If Roger consumes 20 piano lessons this year, how many ice-skating lessons will he consume next year?

(Multiple Choice)

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Question 26

The intertemporal budget constraint for a consumer can be expressed by setting the present value of her lifetime consumption equal to the future value of her endowment.

(True/False)

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Question 27

If a consumer can borrow and lend at the same interest rate, then he can exactly afford a consumption plan if the present value of his consumption equals the present value of his income.

(True/False)

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Question 28

Samantha Smoothie's utility function is U(c₁, c₂)= c₁c₂, where c₁ is her consumption in period 1 and c₂ is her consumption in period 2.She earns $200 in period 1 and $220 in period 2.Samantha can borrow and lend at an interest rate of 10% and there is no inflation.The number of dollars that Samantha spends in the second period must be

(Multiple Choice)

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Question 29

Patience has a utility function U(c₁, c₂) c^1/2₁ + 0.83c^1/2₂, where c₁ is her consumption in period 1 and c₂ is her consumption in period 2.Her income in period 1 is twice as large as her income in period 2.At what interest rate will she choose to consume the same amount in period 1 as in period 2?

(Multiple Choice)

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Question 30

Molly has income $400 in period 1 and income $600 in period 2.Her utility function is c^a₁c¹^-^a₂, where a = 0.40 and the interest rate is 0.20.If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would

(Multiple Choice)

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Question 31

Peregrine consumes ($1,300, $1,320)and earns ($1,000, $1,680).If the interest rate is 0.20, the present value of his endowment is

(Multiple Choice)

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Question 32

An increase in the interest rate cannot make a lender who satisfies WARP become a borrower.

(True/False)

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Question 33

In an isolated mountain village, the harvest this year is 6,000 bushels of grain and the harvest next year will be 900 bushels.The villagers all have utility functions U(c₁, c₂)= c₁c₂, where c₁ is consumption this year and c₂ is consumption next year.Rats eat 40% of any grain that is stored for a year.How much grain could the villagers consume next year if they consume 1,000 bushels of grain this year?

(Multiple Choice)

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Question 34

Mr.O.B.Kandle has a utility function c₁c₂, where c₁ is his consumption in period 1 and c₂ is his consumption in period 2.He will have no income in period 2.If he had an income of $80,000 in period 1 and the interest rate increased from 10 to 19%,

(Multiple Choice)

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Question 35

If the nominal interest rate is 5% and if prices fall by 3% per year, then the real rate of interest is approximately 8%.

(True/False)

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Question 36

In an isolated mountain village, the harvest this year is 3,000 bushels of grain and the harvest next year will be 1,100 bushels.The villagers all have utility functions U(c₁, c₂)= c₁c₂, where c₁ is consumption this year and c₂ is consumption next year.Rats eat 10% of any grain that is stored for a year.How much grain could the villagers consume next year if they consume 1,000 bushels of grain this year?

(Multiple Choice)

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Question 37

Harvey Habit has a utility function U(c₁, c₂)= min{c₁, c₂}, where c₁ and c₂ are his consumption in periods 1 and 2 respectively.Harvey earns $147 in period 1 and he will earn $63 in period 2.Harvey can borrow or lend at an interest rate of 10%.There is no inflation.

(Multiple Choice)

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Question 38

The real interest rate is the interest rate that one receives net of brokerage costs or fees imposed by financial intermediaries.

(True/False)

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Question 39

It would be a mistake to choose the investment that maximizes the present value of your income stream unless you planned to spend your entire wealth in the current time period.

(True/False)

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Question 40

Showing 21 - 40 of 61

Exam 9: Intertemporal Choice-Part A

Susan is a net borrower when the interest rate is 10% and a net saver when the interest rate is 20%.A decrease in the interest rate from 20% to 10% may make Susan worse off.

If the interest rate is less than the inflation rate, a rational person will never save money.

Molly has income $200 in period 1 and income $920 in period 2.Her utility function is ca1c1-a2, where a = 0.80 and the interest rate is 0.15.If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would

The intertemporal budget constraint for a consumer can be expressed by setting the present value of her lifetime consumption equal to the future value of her endowment.

If a consumer can borrow and lend at the same interest rate, then he can exactly afford a consumption plan if the present value of his consumption equals the present value of his income.

Patience has a utility function U(c1, c2) c1/21 + 0.83c1/22, where c1 is her consumption in period 1 and c2 is her consumption in period 2.Her income in period 1 is twice as large as her income in period 2.At what interest rate will she choose to consume the same amount in period 1 as in period 2?

Molly has income $400 in period 1 and income $600 in period 2.Her utility function is ca1c1-a2, where a = 0.40 and the interest rate is 0.20.If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would

Peregrine consumes ($1,300, $1,320)and earns ($1,000, $1,680).If the interest rate is 0.20, the present value of his endowment is

An increase in the interest rate cannot make a lender who satisfies WARP become a borrower.

Mr.O.B.Kandle has a utility function c1c2, where c1 is his consumption in period 1 and c2 is his consumption in period 2.He will have no income in period 2.If he had an income of $80,000 in period 1 and the interest rate increased from 10 to 19%,

If the nominal interest rate is 5% and if prices fall by 3% per year, then the real rate of interest is approximately 8%.

Harvey Habit has a utility function U(c1, c2)= min{c1, c2}, where c1 and c2 are his consumption in periods 1 and 2 respectively.Harvey earns $147 in period 1 and he will earn $63 in period 2.Harvey can borrow or lend at an interest rate of 10%.There is no inflation.

The real interest rate is the interest rate that one receives net of brokerage costs or fees imposed by financial intermediaries.

It would be a mistake to choose the investment that maximizes the present value of your income stream unless you planned to spend your entire wealth in the current time period.

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part A

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Molly has income $200 in period 1 and income $920 in period 2.Her utility function is c^a₁c¹^-^a₂, where a = 0.80 and the interest rate is 0.15.If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would

Molly has income $400 in period 1 and income $600 in period 2.Her utility function is c^a₁c¹^-^a₂, where a = 0.40 and the interest rate is 0.20.If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would

Mr.O.B.Kandle has a utility function c₁c₂, where c₁ is his consumption in period 1 and c₂ is his consumption in period 2.He will have no income in period 2.If he had an income of $80,000 in period 1 and the interest rate increased from 10 to 19%,

Harvey Habit has a utility function U(c₁, c₂)= min{c₁, c₂}, where c₁ and c₂ are his consumption in periods 1 and 2 respectively.Harvey earns $147 in period 1 and he will earn $63 in period 2.Harvey can borrow or lend at an interest rate of 10%.There is no inflation.