Suppose that you were to incorporate the repayment of a consumer loan interest and principal into an intertemporal budget constraint. The loan would be added as income in the year received and
A) principal and interest would all be subtracted in the year the loan was finally paid off.
B) interest and principal would be subtracted in each year according to that schedule by which the loan was to be paid off.
C) interest would be subtracted immediately on receipt of the loan, but principal would be subtracted only in the year that the loan was finally paid off.
D) only interest would be subtracted and that only for the duration of the loan.
E) none of the above.

Question

Quizplus · Accepted Answer

Incorporating the repayment of a consumer loan into an intertemporal budget constraint accurately involves subtracting both interest and principal in each year according to the repayment schedule of the loan. This reflects the ongoing financial obligations over the term of the loan, rather than deferring all deductions to the final year or treating interest and principal repayments differently.

Suppose That You Were to Incorporate the Repayment of a Consumer