Suppose an Individual Has a Fixed Amount of Wealth to Allocate

Multiple Choice

Suppose an individual has a fixed amount of wealth to allocate between consumption in two periods (c₁ and c₂) .Any funds not spent in period 1 will earn interest (at the rate r) which will increase purchasing power in period 2.Consider four possible reactions to an increase in r:
I.c₁ increases.
II.c₁ decreases.
III.c₂ increases.
IV.c₂ decreases.
Which of these is consistent with the hypothesis that both c₁ and c₂ are normal goods?

A) I,II,III,and IV
B) I,II,and IV,but not III
C) I,III,and IV,but not II
D) I,II and III,but not IV