The intertemporal tradeoff between present and future consumption is measured by the
A) nominal interest rate.
B) real interest rate.
C) terms of trade.
D) rate of economic growth.
E) inflation rate.

Question

Quizplus · Accepted Answer

The intertemporal tradeoff between present and future consumption is measured by the real interest rate. The real interest rate represents the opportunity cost of consuming now rather than saving and consuming in the future. An increase in the real interest rate incentivizes individuals to save and invest, thereby increasing future consumption at the expense of present consumption. The other options listed are not directly related to the intertemporal tradeoff between present and future consumption.

The Intertemporal Tradeoff Between Present and Future Consumption Is Measured