If We Represents a Two-Period Consumer's Lifetime Wealth And $r$ Denotes the Real Rate of Interest, the Horizontal (Current Consumption)

question 67

Multiple Choice

If we represents a two-period consumer's lifetime wealth and $r$ denotes the real rate of interest, the horizontal (current consumption) intercept of the consumer's budget line is equal to

• A) \(- ( 1 + r ) c + w e ( 1 + r )\).
• B) \(w e ( 1 + r )\).
• C) we.
• D) \(\frac { w e } { ( 1 + r ) }\).
• E) \(\frac { ( 1 + r ) } { w e }\).

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Definitions:

Average Rate of Return Method

A method of evaluating capital investments by calculating the average annual profit expected from the investment and dividing it by the initial investment cost.

Present Value

The contemporary valuation of a future money sum or cash flow series, based on a predetermined return rate.

Time Value

The idea that having money now is more valuable than having the same sum in the future because of its ability to generate earnings.

Money Concept

A financial principle that emphasizes the role of currency in transactions and as a measure of value in the economic system.