In a Simple Model of Credit Imperfections, When Consumers Borrow

question 11

Multiple Choice

In a simple model of credit imperfections, when consumers borrow and lend at different interest rates, the budget line is kinked because

• A) the consumer cannot consumer more than disposable income in any period.
• B) taxes exceed income.
• C) the consumer lends at a higher rate than they borrow.
• D) the consumer lends at a lower rate than they borrow.
• E) income exceeds taxes.

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Definitions:

Distorted

Altered from a natural, normal, or original shape, size, or condition, resulting in a misrepresentation of reality or truth.

Stagnates

The state or process of ceasing to flow, move, or develop; often used in reference to water, projects, or personal growth.

Depression

A common but serious mood disorder that affects how you feel, think, and handle daily activities.

Mixed-Gender Groups

Groups composed of individuals of different genders, aiming to provide diverse social interactions.