Assume that we are modeling inter-temporal consumption for a typical consumer. Further assume that we measure current consumption on the horizontal axis and future consumption on the vertical axis. A market exists where borrowing and lending can occur for a fixed interest rate, r. Now identify the statement that is false.
A) When a consumer can lend or borrow at the same interest rate, the consumer's budget constraint is a straight line.
B) When the rate at which a consumer can borrow is higher than the rate at which the consumer can lend, the consumer's budget constraint is composed of two straight lines with different slopes.
C) When a consumer cannot borrow money or earn an interest rate for saving money, the consumer's budget constraint is a straight line.
D) When a consumer has access to financial markets so that he/she can lend or borrow money, his/her budget constraint is expanded when compared to his/her budget constraint without access to financial markets.
Correct Answer:
Verified
Q40: The theory of consumer choice:
A)describes how a
Q41: When analyzing how borrowing and lending
Q42: When we do not have information regarding
Q43: When analyzing how borrowing and lending
Q44: The budget constraint is a function of
Q46: The budget line represents the set of
Q47: If the government would like to induce
Q48: Suppose a consumer buys two goods,
Q49: Suppose a consumer buys two goods,
Q50: If a consumer states that he is
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents