MrOBKandle Has a Utility Function C₁c₂, Where C₁ Is His

question 10

Multiple Choice

Mr.O.B.Kandle has a utility function c₁c₂, where c₁ is his consumption in period 1 and c₂ is his consumption in period 2.He has no income in period 2.If he had an income of $50,000 in period 1 and the interest rate increased from 10 to 15%,

• A)his savings would increase by 5% and his consumption in period 2 would also increase.
• B)his savings would not change but his consumption in period 2 would increase by 1,250.
• C)his consumption in both periods would increase.
• D)his consumption in both periods would decrease.
• E)his consumption in period 1 would decrease by 15% and his consumption in period 2 would also decrease.

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Definitions:

Statement of Stockholder's Equity

A financial statement that shows the changes in the value of a company's equity over a reporting period.

Balance Sheet

A detailed statement reflecting a company's tangible assets, owed liabilities, and shareholder equity at a particular time.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, usually a fiscal quarter or year.

Statement of Cash Flows

A financial report that offers comprehensive details on all cash receipts and expenditures a company incurs from its operational activities and external funding sources.