A decrease in the interest rate will cause the intertemporal budget constraint to _______________ through the endowment point.
A) pivot clockwise
B) pivot counter-clockwise
C) shift clockwise
D) shift counter-clockwise

Question

Quizplus · Accepted Answer

A decrease in the interest rate makes future consumption cheaper relative to current consumption, causing the intertemporal budget constraint to pivot counter-clockwise through the endowment point. This reflects the increased ability to consume more in the future for a given level of current consumption.

A Decrease in the Interest Rate Will Cause the Intertemporal