When Analyzing How Borrowing and Lending Affect the Consumer's Budget

question 40

Multiple Choice

When analyzing how borrowing and lending affect the consumer's budget constraint, we measure spending in the current time period on the horizontal axis and spending in the future time period on the vertical axis. Assume that the interest rate at which the consumer can lend and borrow is 10%, income in period 1 is $1000 and income in period 2 is $1200. The point of maximum current consumption can be expressed as

• A) 1000+ 1200/1.1.
• B) 1000(1.1) + 1200.
• C) 1000+ 1200 + .1
• D) 1000/1.1 + 1200/1.1 + 1.

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Definitions:

Inequality

The state of not being equal, especially in status, rights, and opportunities.

Affordable Housing

housing units that are reasonably priced and accessible to individuals and families with moderate to low incomes.

Coalition

A temporary alliance or partnering of groups in order to achieve a common purpose or to engage in joint activity.

Low-income Residents

Individuals or families living with earnings that fall below a designated threshold, often leading to financial insecurity.