Figure 11A -In Figure 11A, the individual's Intertemporal budget line is: A)the line including the points G, N^*and E^*. B)the line including the points N^*and E^*. C)the line including the point E^*only. D)the line including the points G, N^*, and 0'.

Question

Quizplus · Accepted Answer

The Intertemporal budget line shows the combinations of present and future consumption that an individual can afford given their present and future incomes and the interest rate. In Figure 11A, the line including the points N^* and E^* represents the Intertemporal budget line because it shows all the combinations of present and future consumption that the individual can afford given their current and future incomes and the interest rate. The other points, G and 0', represent the individual's current consumption and future consumption, respectively, but they do not represent all possible combinations and therefore are not the Intertemporal budget line.

Figure 11A -In Figure 11A, the Individual's Intertemporal Budget Line Is