Since interest rates for borrowing are usually higher than interest rates for savings, the intertemporal budget constraint has an inward kink for individuals that earn income now and in the future.

Question

Quizplus · Accepted Answer

The intertemporal budget constraint typically represents a straight line when plotted, reflecting the trade-off between current and future consumption without an inward kink. The difference in interest rates for borrowing and saving affects the slope of the budget constraint but does not cause it to kink.

Since Interest Rates for Borrowing Are Usually Higher Than Interest