In the intertemporal consumer choice model,an increase in _____ will alter the slope of the budget line.
A)saving
B)the interest rate
C)future income
D)borrowing

Question

Quizplus · Accepted Answer

The intertemporal consumer choice model considers decisions made by consumers over time, with the current period and a future period being the two periods of interest. The interest rate plays a crucial role in this model as it determines the opportunity cost of current consumption in terms of future consumption. An increase in the interest rate raises the opportunity cost of current consumption, making future consumption more attractive relative to current consumption. As a result, the slope of the budget line changes, becoming steeper. Thus, an increase in the interest rate alters the slope of the budget line, making choice B the correct answer.

In the Intertemporal Consumer Choice Model,an Increase in _____ Will