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Question 45

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Use the following to answer questions :
Exhibit: Residential Investment Use the following to answer questions : Exhibit: Residential Investment -(Exhibit: Budget Constraint) Based on the graph, if Y<sub>1</sub> and Y<sub>2</sub> represent income in period one and period two, respectively, r is the interest rate, and the consumer chooses to consume combination A on the budget constraint, what will be the level of consumption in period two, C<sub>2</sub>? A) Y<sub>1</sub>(1 + r) + Y<sub>2</sub> B) Y<sub>1</sub> + Y<sub>2</sub>/(1 + r) C) Y<sub>1</sub>/(1 + r) + Y<sub>2</sub> D) Y<sub>1</sub> + Y<sub>2</sub>(1 + r)
-(Exhibit: Budget Constraint) Based on the graph, if Y1 and Y2 represent income in period one and period two, respectively, r is the interest rate, and the consumer chooses to consume combination A on the budget constraint, what will be the level of consumption in period two, C2?


A) Y1(1 + r) + Y2
B) Y1 + Y2/(1 + r)
C) Y1/(1 + r) + Y2
D) Y1 + Y2(1 + r)

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