The intertemporal budget constraint basically states that:
A) the present value of consumption must equal lifetime income only.
B) total consumption equals total income.
C) the present value of consumption must equal lifetime wealth.
D) there is no future consumption because there is no future income.
E) the present value of consumption is paid for by today's income only.

Question

Quizplus · Accepted Answer

The intertemporal budget constraint states that the present value of consumption must equal lifetime wealth, which includes both current and future income and assets. This means that individuals cannot consume more than their total wealth over their lifetime. Therefore, choice C is the correct answer. Choices A, B, D, and E do not accurately reflect the intertemporal budget constraint.

The Intertemporal Budget Constraint Basically States That