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Suppose That You Have $100 Today and Expect to Receive

Question 36

Multiple Choice

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. Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis. What is the slope of this budget constraint?


A) −0.75
B) −1.00
C) −1.25
D) −2.25

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