In a graph that has current consumption on the horizontal axis and future consumption on the vertical axis, the horizontal intercept of the budget line is the present value of all one's income in the two periods.

Question

Quizplus · Accepted Answer

The budget line represents the combinations of current and future consumption that are affordable given one's income and the interest rate. The horizontal intercept of the budget line is the amount of current consumption that can be afforded if no future consumption is desired. This is equal to the present value of all one's income in the two periods.

In a Graph That Has Current Consumption on the Horizontal