An intertemporal budget constraint ________.
A)describes how much time an individual consumer has to spend their disposable net national product
B)is independent of the real interest rate and wealth of the household
C)divides consumption spending into three categories: spending on durables,non-durables and services
D)describes how much a person can consume today versus tomorrow

Question

Quizplus · Accepted Answer

An intertemporal budget constraint describes how the total amount of consumption over an individual's lifetime is constrained by their current wealth, income, and the real interest rate. It compares the amount of resources available to the person in the present to the amount that will be available in the future, taking into account the cost of borrowing or the return on saving. This determines how much the person can consume today versus how much they must save or borrow to consume in the future.

An Intertemporal Budget Constraint ________