In the Two-Period Model, an Increase in Income in Period

question 3

Multiple Choice

In the two-period model, an increase in income in period 1 causes the budget constraint to

• A)shift to the left in a parallel fashion.
• B)shift to the right in a parallel fashion.
• C)rotate in a clockwise direction along the horizontal axis.
• D)rotate in a counterclockwise direction along the vertical axis.

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Definitions:

Budgeted Balance Sheet

A financial statement that projects the balances of assets, liabilities, and equity based on expected future transactions.

Financial Position

An overview of a person's or organization's assets, liabilities, and equity at a specific point in time, showing the net worth or financial health.

Operating Budget

A detailed projection of all expected income and expenses based on forecasted sales revenue during a given period, typically a fiscal year.

Accounts Receivable

Amounts owed by customers on account.