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Intertemporal Budget Constraint

Question 26

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Intertemporal Budget Constraint Intertemporal Budget Constraint -Given the table above,suppose consumption in period two is $40,000.Then,the interest rate rises to five percent,and period-two consumption does not change.We may infer that ________. A) the income effect is stronger than the substitution effect B) the substitution effect is stronger than the income effect C) the substitution and income effects cancel out D) this consumer has a binding borrowing constraint
-Given the table above,suppose consumption in period two is $40,000.Then,the interest rate rises to five percent,and period-two consumption does not change.We may infer that ________.


A) the income effect is stronger than the substitution effect
B) the substitution effect is stronger than the income effect
C) the substitution and income effects cancel out
D) this consumer has a binding borrowing constraint

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