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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Definitions:

Profit Forecast

An estimation of future financial earnings or losses, typically focusing on income and expenses, over a specified period.

Sole Proprietorship

A business structure where a single individual owns, manages, and is responsible for all aspects of the business.

Married Couple

A legally wedded partnership comprising two individuals who have undergone a marriage ceremony and are recognized as spouses.

Angel Investor

An angel investor is a wealthy individual who provides capital to start-ups or entrepreneurs, often in exchange for ownership equity or convertible debt.