If an Individual Has No Access to Credit Markets

question 8

Multiple Choice

If an individual has no access to credit markets:

• A)her marginal propensity to consume is one.
• B)she saves much less.
• C)she can consumption smooth.
• D)her marginal propensity to consume is equal to 1/T if she lives T periods.
• E)her future consumption is equal to zero.

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Definitions:

Elastic Demand

Describes a situation where the quantity demanded of a good or service significantly changes in response to changes in its price.

High Tariffs

Elevated taxes imposed on imported goods and services to protect domestic industries or to generate revenue.

Unionized Sectors

Industries or sectors where workers are members of a union, which negotiates wages, working conditions, and other employment terms on their behalf.

Inflation

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.