In the Two-Period Model, Suppose a Household's Income in the First

question 45

Multiple Choice

In the two-period model, suppose a household's income in the first period is $40,000, income in the second period is $50,000, and the real interest rate is 25 percent.By how much would the household's maximum spending in the first period increase if income in the second period increased to 60,000?

• A)$6,000
• B)$8,000
• C)$10,000
• D)$12,000

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