If a consumer can borrow and lend at the same interest rate, then he can exactly afford a consumption plan if the present value of his consumption equals the present value of his income.

Question

Quizplus · Accepted Answer

If the interest rate is the same for borrowing and lending, then the present value of a consumer's income should match the present value of his consumption. This concept is known as intertemporal budget constraint.

If a Consumer Can Borrow and Lend at the Same