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: Which of these is consistent with the hypothesis that both C₁ and C₂ are normal goods?
I.C₁ increases.
II.C₁ decreases.
III.C₂ increases.
IV.C₂ decreases.

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