Will Wisp will live for exactly two periods.His utility function is U(c1,c2)=c1c2,where c1 is consumption in period 1 and c2 is consumption in period 2.He will have no income in period 2.His income in period 1 is $80,000.If the interest rate rises from 10 to 12%:

A) his savings will increase by 2% and his consumption in period 2 will increase. B) his savings will not change but his consumption in period 2 will increase by $800. C) his consumption in both periods will increase. D) his consumption in both periods will decrease. E) his consumption in period 1 will decrease by 12% and his consumption in period 2 will increase. A) his savings will increase by 2% and his consumption in period 2 will increase. B) his savings will not change but his consumption in period 2 will increase by $800. C) his consumption in both periods will increase. D) his consumption in both periods will decrease. E) his consumption in period 1 will decrease by 12% and his consumption in period 2 will increase.

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 10:Intertemporal Choice-Part A

Roger's utility function is U =min{1,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 21

Will Wisp will live for exactly two periods.His utility function is U(c₁,c₂)=c₁c₂,where c₁ is consumption in period 1 and c₂ is consumption in period 2.He will have no income in period 2.His income in period 1 is $80,000.If the interest rate rises from 10 to 12%:

(Multiple Choice)

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Question 22

In an isolated peasant village,the only crop is corn.Good harvests alternate with bad harvests.This year the harvest will be 1,000 bushels.Next year it will be 150 bushels.There is no trade with the outside world.Corn can be stored,but rats will eat 25% of what is stored in a year.The villagers have the Cobb-Douglas utility function U(c₁,c₂)=c₁c₂,where c₁ is consumption this year and c₂ is consumption next year. a.Draw a budget line for the village with this year's consumption on the horizontal axis and next year's consumption on the vertical axis.On your graph show the quantities at which the budget line intercepts the vertical and horizontal axes. b.How much will the villagers consume this year? c.How much will the rats eat? d.How much will the villagers consume next year?

(Short Answer)

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Question 23

The nominal interest rate is 5% and the inflation rate is 6%.A rational consumer

(Multiple Choice)

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Question 24

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 25

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 $189 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 26

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 27

Ymir Larson farms near Niffleheim,Minnesota.He works 80 hours a week.He can either grow rutabagas or raise pigs.Every hour that he spends growing rutabagas gives him $2 of income this year.Every hour that he spends raising pigs this year will add $4 to his income next year.In fact,next year's weekly income will be 100+ 4H dollars where H is the number of hours he spends raising pigs this year.Ymir's utility function is U(c₁,c₂)=min{c₁,c₂},where c₁ and c₂ are his consumption expenditures this year and next year.Ymir doesn't believe in banks and will neither lend money nor borrow money. a.Draw Ymir's budget line for current and future consumption,labeling key points on it. b.How many hours a week will he choose to spend raising pigs? c.How much money will he spend per week on consumption in each year?

(Essay)

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Question 28

Peregrine consumes ($700,$880)and earns ($600,$990).If the interest rate is 0.10,the present value of his endowment is

(Multiple Choice)

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Question 29

Suppose that a person can borrow and lend at an interest rate of 10%.But there is a 5% rate of inflation and the person has to pay an income tax of 30% on all interest income.If the person borrows money,he can deduct interest as an expense.Where current consumption is on the horizontal axis and future consumption is on the vertical axis,the budget line will

(Multiple Choice)

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Question 30

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 31

Luella has to pay an interest rate of 50% to borrow.She only gets an interest rate of 5% if she lends.She is currently endowed with $1,000 in period 1 and $1,050 in period 2.She considers two alternative investment projects.She can only choose one of them.For project A she would have to pay $500 in period 1 and would be paid back $630 in period 2.For project B,she would be paid $500 in period 1 and would have to pay back $525 in period 2. a.Diagram her budget set if she chooses project A.Also show her budget if she chooses project B. b.If she neither borrows nor lends,which project has the higher present value at the interest rate 50%? Which has the higher present value at an interest rate of 5%? c.Draw indifference curves such that she should choose A. d.With different preferences might she choose B?

(Short Answer)

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Question 32

I am always indifferent between a unit of consumption today and tomorrow and the interest rate is 5%.

(Multiple Choice)

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Question 33

If current and future consumption are both normal goods,an increase in the interest rate will necessarily

(Multiple Choice)

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Question 34

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 35

Patience has a utility function U(c₁,c₂)=c^1/2₁ +0.80c^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 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

Mandy has an income of $800 in period 1 and will have an income of $500 in period 2.Her utility function is U(c₁,c₂)=c^0.80₁c^0.20₂,where c₁ is her consumption in period 1 and c₂ is her consumption in period 2.The interest rate is .25.If she unexpectedly won a lottery which pays its prize in period 2 so that her income in period 2 would be $1,000 and her income in period 1 would remain $800,then her consumption in period 1 would

(Multiple Choice)

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Question 38

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 39

If the real rate of interest is 8% and the nominal rate of interest is 28%,then the rate of inflation must be about

(Multiple Choice)

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Question 40

Showing 21 - 40 of 61

Exam 10:Intertemporal Choice-Part A

Will Wisp will live for exactly two periods.His utility function is U(c1,c2)=c1c2,where c1 is consumption in period 1 and c2 is consumption in period 2.He will have no income in period 2.His income in period 1 is $80,000.If the interest rate rises from 10 to 12%:

The nominal interest rate is 5% and the inflation rate is 6%.A rational consumer

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 $189 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.

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?

Peregrine consumes ($700,$880)and earns ($600,$990).If the interest rate is 0.10,the present value of his endowment is

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

I am always indifferent between a unit of consumption today and tomorrow and the interest rate is 5%.

If current and future consumption are both normal goods,an increase in the interest rate will necessarily

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.

Patience has a utility function U(c1,c2)=c1/21 +0.80c1/22,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 $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

If the real rate of interest is 8% and the nominal rate of interest is 28%,then the rate of inflation must be about

Demand-Part A

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-Part A

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

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters

Will Wisp will live for exactly two periods.His utility function is U(c₁,c₂)=c₁c₂,where c₁ is consumption in period 1 and c₂ is consumption in period 2.He will have no income in period 2.His income in period 1 is $80,000.If the interest rate rises from 10 to 12%:

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 $189 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.

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.

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