In the multi-year budget constraint the present value of consumption equals the value of initial assets plus the:
A)present value of savings.
B)present value of final assets.
C)present value of wage incomes.
D)the present value of time.

Question

Quizplus · Accepted Answer

In the multi-year budget constraint, the present value of consumption equals the value of initial assets plus the present value of wage incomes. This accounts for the income that an individual earns over time, which can be spent on consumption. Savings and final assets are outcomes of the budgeting process, not inputs, and "the present value of time" is not a standard economic concept in this context.

In the Multi-Year Budget Constraint the Present Value of Consumption