MrOBKandle Has a Utility Function C₁c₂, Where C₁ Is His

question 9

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 $70,000 in period 1 and the interest rate increased from 10 to 16%,

• A)his savings would increase by 6% and his consumption in period 2 would also increase.
• B)his consumption in both periods would decrease.
• C)his savings would not change but his consumption in period 2 would increase by 2,100.
• D)his consumption in both periods would increase.
• E)his consumption in period 1 would decrease by 16% and his consumption in period 2 would also decrease.

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Definitions:

Economically Important Relationships

Linkages or interactions between economic entities or factors that significantly influence outcomes such as growth, inflation, or market dynamics.

Common-size Balance Sheet

A financial statement displaying all line items as a percentage of total assets, facilitating comparison across companies or periods.

Total Assets

The sum of all assets owned by a business, including cash, inventory, property, and equipment, reflecting the total resources of an entity.

Comparative Financial Statements

Financial statements that present the financial position and performance of a company over multiple periods, facilitating trend analysis and comparison.