Suppose That Molly Had an Income of $200 in Period

question 31

Multiple Choice

Suppose that Molly 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:

Nile River

One of the world’s longest rivers, flowing through northeastern Africa, it is a crucial water source for the countries it spans and has been integral to the region's history.

Confident

Feeling or showing certainty about something or self-assurance.

Correct

Conforming to fact or truth; free from error, in alignment with a standard or expectation.

Shifting Attention

The cognitive process of moving one's focus from one subject or object to another.