MrOBKandle Has a Utility Function C₁c₂, Where C₁ Is

question 17

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 $40,000 in period 1 and the interest rate increased from 10 to 19%,

• A)his savings would not change but his consumption in period 2 would increase by 1,800.
• B)his savings would increase by 9% and his consumption in period 2 would also increase.
• C)his consumption in both periods would decrease.
• D)his consumption in both periods would increase.
• E)his consumption in period 1 would decrease by 19% and his consumption in period 2 would also decrease.

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Definitions:

Pareto Optimality

A distribution of resources where no one can be made better off without causing detriment to at least one other person.

Utilities Possibilities Frontier

A graphical representation that shows the maximum number of goods or services that two countries can produce using their resources efficiently.

Efficient

Achieving maximum productivity with minimum wasted effort or expense; effectively utilizing resources.

Equitable

Fair and impartial treatment or distribution, often in the context of socio-economic policies.