Suppose That Molly from Problem 2 Had an Income of $200

question 26

Multiple Choice

Suppose that Molly from Problem 2 had an income of $200 in period 1 and an income of $460 in period 2. Suppose that her utility function were c^a₁c^1-a₂, where a = 0.40 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) increase by $80.
• B) increase by $40.
• C) double.
• D) stay constant.
• E) increase by $200.

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Definitions:

Cursive

A style of penmanship where characters are written in a flowing manner, typically for the purpose of making writing faster.

Conscious Information Processing

The deliberate and aware thinking, analysis, and judgement of information.

Unconscious Information Processing

Refers to the mental processes not in immediate conscious awareness that influence judgments, feelings, or behaviors.

Circadian Rhythm

Biological processes that display an endogenous, entrainable oscillation of about 24 hours, primarily influenced by light and darkness in an organism's environment.