One of the implications of the intertemporal budget constraint is that:
A) current consumption does not have to equal current income.
B) there can be income transfers between today and the future.
C) lifetime consumption equals total wealth.
D) All of these answers are correct.
E) None of these answers is correct.

Question

Quizplus · Accepted Answer

The intertemporal budget constraint states that current consumption plus current savings must equal current income minus current taxes plus future income (adjusted for interest). Therefore, current consumption does not have to equal current income, income transfers can happen between today and the future, and lifetime consumption (sum of current and future consumption) must equal total wealth. All of these answers are correct.

One of the Implications of the Intertemporal Budget Constraint Is