When Analyzing How Borrowing and Lending Affect the Consumer's Budget $1000 + 1200 / 1.1$

question 26

Multiple Choice

When analyzing how borrowing and lending affect the consumer's budget constraint, we measure spending in the current time period on the horizontal axis and spending in the future time period on the vertical axis. Assume that the interest rate at which the consumer can lend and borrow is 10% and income in period 1 is $1000 while income in period 2 is $1200. The point of maximum future consumption can be expressed as:

• A) \(1000 + 1200 / 1.1\).
• B) \(1000 ( 1.1 ) + 1200\).
• C) \(1000 + 1200 + .1\).
• D) \(1000 / 1.1 + 1200 / 1.1 + 1\).

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Definitions:

Excessive Pauses

Overly frequent or lengthy breaks in speech or writing, which can disrupt the flow of communication.

Trust

The confidence or belief in the reliability, truth, ability, or strength of someone or something.

Conviction

A firmly held belief or opinion, often driving individuals to act according to their principles or deeply held values.

Confidence

A state of being certain about the truth of something or having a firm trust in someone or one's own abilities.