In a Simple Model of Credit Imperfections,when Consumers Borrow and Lend

question 19

Multiple Choice

In a simple model of credit imperfections,when consumers borrow and lend at different interest rates,the budget line is kinked because

• A) the consumer cannot consumer more than disposable income in any period.
• B) taxes exceed income.
• C) the consumer lends at a higher rate than they borrow.
• D) the consumer lends at a lower rate than they borrow
• E) income exceeds taxes.

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Definitions:

More To Less

A principle or process that involves moving from a greater quantity or quality to a lesser one.

Price Falls

A decrease in the market price of goods or services, often due to increased supply or reduced demand.

Commodity Bundles

A set of goods or services that are considered together, often for purposes of comparison or purchase.

Nonnegative Amounts

Quantities that are greater than or equal to zero, often used in mathematics and economics.