If the interest rate at which you can borrow is higher than the interest rate at which you can lend, your budget for current and future consumption is a convex set.

Question

Quizplus · Accepted Answer

If the interest rate at which you can borrow is higher than the interest rate at which you can lend, this implies that you are paying more in interest than you are earning. This will result in a decreasing budget constraint, which is a concave set, rather than a convex set.

If the Interest Rate at Which You Can Borrow Is