John Is Planning Ahead for Retirement in a Two-Period World

question 506

Multiple Choice

John is planning ahead for retirement in a two-period world. When John is young he will earn $1 million, and when John is old and retired he will be given $50,000 from Social Security. If the interest rate between the two time periods is 7 percent, what is the slope of John's budget constraint when considering the consumption possibilities between the two periods if consumption when young is graphed on the horizontal axis and consumption when old is graphed on the vertical axis?

• A)-0.89
• B)-1.05
• C)-1.07
• D)-1.12

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