Intertemporal Budget Constraint

question 26

Multiple Choice

Intertemporal Budget Constraint
-Given the table above,suppose consumption in period two is $40,000.Then,the interest rate rises to five percent,and period-two consumption does not change.We may infer that ________.

• A)the income effect is stronger than the substitution effect
• B)the substitution effect is stronger than the income effect
• C)the substitution and income effects cancel out
• D)this consumer has a binding borrowing constraint

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Definitions:

Assertiveness

The quality of being self-assured and confident without being aggressive, enabling an individual to express their thoughts and feelings in a direct, honest manner.

Ingratiation Activities

Behaviors aimed at gaining favor or approval from others, often through flattery or other forms of sycophancy.

Silent Authority

A form of power where someone complies with requests or orders based on the implicit power or position of the requester.

Persuasion

The act or process of influencing someone's beliefs, attitudes, or behaviors through argument, reasoning, or appeal.