In the real intertemporal model with investment
A) we abstract from labor/leisure choice.
B) consumers always save a constant fraction of their income.
C) there are many different consumers.
D) consumers make choices over current consumption and leisure, and future consumption and leisure.

Question

Quizplus · Accepted Answer

In the intertemporal model with investment, consumers make choices over current and future consumption and leisure, as well as investment decisions. This is because their decisions today will affect their future income through the return on investment. Choice A is incorrect because the model still considers consumption and leisure choices, even if it abstracts from labor/leisure choice. Choice B is incorrect because consumers' savings decisions are not necessarily constant. In fact, they depend on interest rates, expected future income, and other factors. Choice C is incorrect because the model assumes a representative consumer who maximizes utility.

In the Real Intertemporal Model with Investment