Figure 5A

-In Figure 5A, changes in the interest rate cause the intertemporal budget:
A)the intertemporal budget lines pivot around point B.
B)line to shift from the line AE' to DB.
C)line to shift from the line DB to AE'.
D)lines to pivot around point A.

Question

Figure 5A

-In Figure 5A, changes in the interest rate cause the intertemporal budget:
A)the intertemporal budget lines pivot around point B. 
B)line to shift from the line AE' to DB. 
C)line to shift from the line DB to AE'. 
D)lines to pivot around point A.

Quizplus · Accepted Answer

Intertemporal budget lines pivot around point A when there are changes in the interest rate because point A represents the present income or wealth, which remains constant. The pivot reflects how future consumption possibilities change with interest rates, without altering present consumption.

Figure 5A -In Figure 5A, Changes in the Interest Rate Cause the Rate