Consider the Budget Constraint Between "Spending Today" on the Horizontal

Multiple Choice

Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis. Suppose that you have $100 today and expect to receive $100 one year from today. Your money market account pays an annual interest rate of 25%, and you may borrow money at that interest rate. Suppose now that the interest rate increases to 40%. What happens to the slope of your budget constraint relative to when the interest rate was 25%? The slope

A) becomes steeper.
B) becomes flatter.
C) doesn't change because the budget constraint shifts in parallel to the original budget constraint.
D) doesn't change because the budget constraint shifts out parallel to the original budget constraint.