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

question 3

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% and income in period 1 is $1000 while income in period 2 is $1200. The point of maximum future 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:

Vertebral Posterior Arch

The posterior portion of the vertebral bone that, together with the vertebral body, encloses the spinal canal.

Nerve Impulses

Electrical signals that travel along nerve cells and are used for communication throughout the body.

Sensation

The process of receiving and interpreting information from the environment through sensory receptors.

Motor Neurons

Nerve cells forming part of a pathway along which impulses pass from the brain or spinal cord to a muscle or gland.