If the government imposes a law requiring you to save when you otherwise would not have,they are
A) truncating a budget line
B) shifting a budget line
C) changing preferences toward saving
D) changing preferences toward consumption

Question

Quizplus · Accepted Answer

When the government imposes a law requiring individuals to save, they are essentially limiting the options available in terms of how individuals can allocate their income. This is represented by truncating the budget line, as it reduces the set of feasible options available to individuals. Shifting a budget line refers to a change in income or prices, which is not applicable in this scenario. Changing preferences toward saving or consumption would involve a shift in the shape or slope of the budget line, which is not the case here.

If the Government Imposes a Law Requiring You to Save