In the two-period model with limited commitment,if the collateral constraint binds
A) increases in the present value of collateral increase current consumption and reduce future consumption.
B) increases in the present value of collateral increase current consumption one-for-one.
C) increases in the present value of collateral decrease current consumption and increase future consumption.
D) increases in the present value of collateral increase current consumption less than one-for-one.
Correct Answer:
Verified
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B)
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