Suppose two people with the same level of income and wealth have different discount rates.Joe has a very high discount rate and Jim has a very low discount rate.Which one of the following is TRUE?
A) Joe is more likely to borrow than Jim.
B) Joe is less likely to borrow than Jim.
C) Joe and Jim will borrow the same amount.
D) Neither Joe nor Jim would be borrowers.

Question

Quizplus · Accepted Answer

Joe, with a high discount rate, values present consumption more than future consumption, making him more inclined to borrow to satisfy current needs or desires. Jim, with a low discount rate, values future consumption more closely to present consumption, making him less likely to borrow.

Suppose Two People with the Same Level of Income and Wealth