Suppose That Molly from Problem 2 Had an Income of $400

question 30

Multiple Choice

Suppose that Molly from Problem 2 had an income of $400 in period 1 and an income of $690 in period 2. Suppose that her utility function were c^a₁c^1-a₂, where a = 0.80 and the interest rate were 15%. If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would

• A) stay constant.
• B) increase by $320.
• C) increase by $160.
• D) double.
• E) increase by $400.

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Definitions:

Multiple Variables

Multiple variables refer to the presence or use of more than one variable in an experiment or analysis to understand complex relationships or effects.

Random Assignment

A method used in experiments to allocate subjects randomly to experimental and control groups, ensuring each participant has an equal chance of any condition.

Technique

A systematic procedure, method, or skill applied in a particular task to achieve a desired result efficiently.

Testing Effect

An educational phenomenon where repeated testing on material leads to better memory retention than through study methods alone.