Intertemporal Budget Constraint
-Given the table above,the present value of lifetime resources ________ when the real interest rate rises to five percent.
A)falls by $367
B)rises by $200
C)rises by $300
D)falls by $275

Question

Intertemporal Budget Constraint 
-Given the table above,the present value of lifetime resources ________ when the real interest rate rises to five percent.
A)falls by $367 
B)rises by $200 
C)rises by $300 
D)falls by $275

Quizplus · Accepted Answer

Based on the table, the present value of lifetime resources is $10,000. When the real interest rate rises to 5%, the present value of lifetime resources falls to $9,633. This is a decrease of $367, which is option A.