Draw a two period budget line where the borrow/lending rate of interest,r,allows consumers to choose consumption in each of the two periods.C1 and C2 given their anticipated income on two periods,Y1 and Y2.The one point on the budget line not affected by the interest rate is
A) $C _ { 1 } = Y _ { 1 } ; C _ { 2 } = Y _ { 2 }$
B)the horizontal intercept.
C)the vertical intercept

Question

Quizplus · Accepted Answer

The one point on the budget line not affected by the interest rate is when the consumer decides to consume exactly their income in each period, $C_1 = Y_1$ and $C_2 = Y_2$, without borrowing or lending. This point remains constant regardless of the interest rate.

Draw a Two Period Budget Line Where the Borrow/lending Rate C1=Y1;C2=Y2C _ { 1 } = Y _ { 1 } ; C _ { 2 } = Y _ { 2 }C1​=Y1​;C2​=Y2​

Draw a Two Period Budget Line Where the Borrow/lending Rate $C _ { 1 } = Y _ { 1 } ; C _ { 2 } = Y _ { 2 }$