In the Two-Period Model, an Increase in the Real Interest

question 4

Multiple Choice

In the two-period model, an increase in the real interest rate 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.
• D)rotate in a counterclockwise direction.

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Definitions:

Incomes

Refers to money received, especially on a regular basis, for work or through investments.

Capital Flight

The rapid movement of large sums of money or assets out of a country due to economic or political instability.

Industrial Advanced Countries (IACs)

Countries characterized by high levels of industrialization, technological advancement, and economic development.

Skilled Workers

Employees who have specialized training, expertise, or qualifications that allow them to perform complex job tasks.