Intertemporal Budget Constraint
-Given the table above,suppose consumption in period two is $35,000.Then,the interest rate rises to five percent,and period-two consumption falls to $34,900.We may infer that ________.
A)the income effect is stronger than the substitution effect
B)the substitution effect is stronger than the income effect
C)the substitution and income effects cancel out
D)this consumer has a binding borrowing constraint

Question

Intertemporal Budget Constraint 
-Given the table above,suppose consumption in period two is $35,000.Then,the interest rate rises to five percent,and period-two consumption falls to $34,900.We may infer that ________.
A)the income effect is stronger than the substitution effect 
B)the substitution effect is stronger than the income effect 
C)the substitution and income effects cancel out 
D)this consumer has a binding borrowing constraint

Quizplus · Accepted Answer

The Answer of Intertemporal Budget Constraint 
-Given the table above,suppose consumption in period two is $35,000.Then,the interest rate rises to five percent,and period-two consumption falls to $34,900.We may infer that ________.
A)the income effect is stronger than the substitution effect 
B)the substitution effect is stronger than the income effect 
C)the substitution and income effects cancel out 
D)this consumer has a binding borrowing constraint