In the two-period model, an increase in income in period 1 causes the budget constraint to
A)shift to the left in a parallel fashion.
B)shift to the right in a parallel fashion.
C)rotate in a clockwise direction along the horizontal axis.
D)rotate in a counterclockwise direction along the vertical axis.

Question

Quizplus · Accepted Answer

An increase in income in period 1 causes the budget constraint to shift to the right in a parallel fashion, as it increases the amount of resources available for consumption in both periods.

In the Two-Period Model, an Increase in Income in Period