MrOBKandle Has a Utility Function C₁c₂, Where C₁ Is His

question 35

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 will have no income in period 2.If he had an income of $80,000 in period 1 and the interest rate increased from 10 to 19%,

• A)his savings would increase by 9% and his consumption in period 2 would also increase.
• B)his savings would not change but his consumption in period 2 would increase by $3,600.
• 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 19% and his consumption in period 2 would also decrease.

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Definitions:

Frank Knight

An influential economist known for his work on risk, uncertainty, and the role these factors play in the economy.

Henry George

An American economist and social reformer of the 19th century known for his advocacy of a "single tax" on land to improve social equity.

Unearned Surplus

Income received without labor or active management, often through investments, rents, or inheritance, not directly resulting from the recipient's effort.

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The income that is gained by governments through taxation.