Will Wisp Will Live for Exactly Two Periods

question 6

Multiple Choice

Will Wisp will live for exactly two periods. His utility function is U(c₁, c₂) = c₁c₂, where c₁ is consumption in period 1 and c₂ is consumption in period 2. He will have no income in period 2. His income in period 1 is $40,000. If the interest rate rises from 10 to 14%:

• A) his savings will increase by 4% and his consumption in period 2 will increase.
• B) his consumption in both periods will increase.
• C) his consumption in both periods will decrease.
• D) his savings will not change but his consumption in period 2 will increase by $800.
• E) his consumption in period 1 will decrease by 14% and his consumption in period 2 will increase.

---

Definitions:

Horsepower

A rating of the amount of work performed by an engine. Originally based on the amount of weight a horse could move in one minute. One HP is equal to about 746 watts.

Wet Sump System

An oil management system used in internal combustion engines where the oil is stored in a sump directly beneath the engine and pumped where needed.

Oil Pump

A crucial component in an engine that circulates engine oil under pressure to the rotating bearings, the sliding pistons, and the camshaft of the engine to lubricate the parts.

In the Block

Refers to components or processes taking place within the main structure of an engine.