Question 1

In the utility functions in Figure 16.1, curve b exhibits:

Accepted Answer

Curve b exhibits diminishing marginal utility, as each additional unit of the good consumed yields less additional satisfaction than the previous unit.

Question 2

With logarithmic utility, the Euler equation is given by:

Accepted Answer

The answer of With logarithmic utility, the Euler equation is...

Question 3

Which of the following represents the consumer's lifetime utility?

Accepted Answer

The answer of Which of the following represents the consumer's...

Question 4

If you have maximized your lifetime utility, you get which of the following?

Accepted Answer

The answer of If you have maximized your lifetime utility,...

Question 5

If moving an extra unit of future consumption to today's consumption improves your lifetime utility, you are not:

Accepted Answer

Maximizing lifetime utility means balancing current consumption with future consumption. If moving an extra unit of future consumption to today's consumption improves one's lifetime utility, then they are not properly balancing their consumption and may not be maximizing their lifetime utility.

Question 6

If the Euler equation did not hold, then:

Accepted Answer

The Euler equation is a fundamental principle in economics that describes how a rational consumer chooses to allocate consumption over different time periods to maximize utility. If the Euler equation did not hold, it would imply that the consumer could rearrange consumption between periods in such a way as to increase overall lifetime utility, indicating that the initial allocation was not optimal. This is because the Euler equation ensures that the marginal utility of consumption is balanced across time, taking into account the real interest rate.

Question 7

If moving an extra unit of today's consumption to future consumption improves your lifetime utility, you are not:

Accepted Answer

The statement is essentially saying that the marginal rate of time preference is less than the real interest rate, which is the condition satisfied by the Euler equation. Therefore, if moving an extra unit of consumption to the future improves your lifetime utility, you are satisfying the Euler equation. The other choices are irrelevant to the given statement.

Question 8

The household problem is to solve:

Accepted Answer

The answer of The household problem is to solve:
...

Question 9

The problem the household must solve is:

Accepted Answer

The problem the household must solve is to choose lifetime consumption that satisfies the intertemporal budget constraint. This means that they need to optimize their consumption over their entire lifetime while taking into account their income and expenses at different points in time. Making choices that result in intertemporal consistency will help ensure the household's financial stability and well-being in the long run.

Question 10

In the intertemporal budget constraint,  is:

Accepted Answer

The intertemporal budget constraint refers to the balance between current consumption and future consumption, given a stream of lifetime income and total lifetime wealth. Therefore, 11eab38d_06eb_f8c6_a5fb_115ff053b3c8_TB6622_00 represents total lifetime wealth, as it includes both current and future income and assets.

Question 11

In the text,  is ________ and 
Is ________.

Accepted Answer

The text uses "discounted marginal utility" and "marginal utility" to refer to different time periods - "today's consumption" and "future consumption" respectively. Therefore, option D, which suggests "the marginal utility of today's consumption" and "the discounted marginal utility of future consumption," is the best choice.

Question 12

The  in the lifetime utility function represents:

Accepted Answer

The answer of The  in the lifetime utility function...

Question 13

The equation  is called:

Accepted Answer

The answer of The equation  is called:
...

Question 14

The  in the lifetime utility function represents:

Accepted Answer

The 11eab38d_06eb_5c7d_a5fb_e798a985ccad_TB6622_00 parameter in the lifetime utility function represents consumer patience. It reflects the individual's willingness to trade present consumption for future consumption. Higher values of TB6622_00 indicate higher patience, while lower values indicate lower patience. Therefore, option D is the correct choice.

Question 15

In the text,  is given by:

Accepted Answer

The answer of In the text,  is given by:
...

Question 16

Which of the following does the Euler equation state?

Accepted Answer

The Euler equation states that a consumer must be indifferent between consuming one more unit today or in the future. This is a fundamental concept in intertemporal decision making and is a cornerstone of macroeconomic theory.

Question 17

The parameter  in the consumer's lifetime utility function represents the ________ and is ________ if utility is worth more today than in the future.

Accepted Answer

The parameter 11eab38d_06eb_838f_a5fb_775bce57e9df_TB6622_00 represents the weight the consumer puts on the future relative to today. If utility is worth more today than in the future, the weight would be less than one, reflecting a lower value placed on future consumption. Therefore, option A is the best choice.

Question 18

Your lifetime utility is a function of:

Accepted Answer

Lifetime utility considers both present consumption and the present value of future consumption. It is important to balance the trade-off between immediate satisfaction and long-term planning in order to maximize lifetime utility. Wealth and income may be factors that influence consumption and future consumption, but they are not the only determinants of utility.

Question 19

In the special case where  , and with logarithmic utility, the Euler equation is given by:

Accepted Answer

The answer of In the special case where  ,...

Question 20

If  in your lifetime utility function, then:

Accepted Answer

The answer of If  in your lifetime utility function,...

Quiz 16: Consumption

In the utility functions in Figure 16.1, curve b exhibits:

With logarithmic utility, the Euler equation is given by:

Which of the following represents the consumer's lifetime utility?

If you have maximized your lifetime utility, you get which of the following?

If moving an extra unit of future consumption to today's consumption improves your lifetime utility, you are not:

If the Euler equation did not hold, then:

If moving an extra unit of today's consumption to future consumption improves your lifetime utility, you are not:

The household problem is to solve:

The problem the household must solve is:

In the intertemporal budget constraint, is:

In the text, is and Is .

The in the lifetime utility function represents:

The equation is called:

The in the lifetime utility function represents:

In the text, is given by:

Which of the following does the Euler equation state?

The parameter in the consumer's lifetime utility function represents the and is if utility is worth more today than in the future.

Your lifetime utility is a function of:

In the special case where , and with logarithmic utility, the Euler equation is given by:

If in your lifetime utility function, then:

Quiz 16: Consumption

In the utility functions in Figure 16.1, curve b exhibits:

With logarithmic utility, the Euler equation is given by:

Which of the following represents the consumer's lifetime utility?

If you have maximized your lifetime utility, you get which of the following?

If moving an extra unit of future consumption to today's consumption improves your lifetime utility, you are not:

If the Euler equation did not hold, then:

If moving an extra unit of today's consumption to future consumption improves your lifetime utility, you are not:

The household problem is to solve:

The problem the household must solve is:

In the intertemporal budget constraint, is:

In the text, is ________ and Is ________.

The in the lifetime utility function represents:

The equation is called:

The in the lifetime utility function represents:

In the text, is given by:

Which of the following does the Euler equation state?

The parameter in the consumer's lifetime utility function represents the ________ and is ________ if utility is worth more today than in the future.

Your lifetime utility is a function of:

In the special case where , and with logarithmic utility, the Euler equation is given by:

If in your lifetime utility function, then:

In the text, is and Is .

The parameter in the consumer's lifetime utility function represents the and is if utility is worth more today than in the future.