Will Wisp Will Live for Exactly Two Periods

question 3

Multiple Choice

Will Wisp will live for exactly two periods.His utility function is U(c₁, c₂) = c₁c₂, where c₁ is consumption in period 1 and c₂ is consumption in period 2.He will have no income in period 2.His income in period 1 is $40,000.If the interest rate rises from 10 to 14%:

• A)his savings will increase by 4% and his consumption in period 2 will increase.
• B)his consumption in both periods will increase.
• C)his consumption in both periods will decrease.
• D)his savings will not change but his consumption in period 2 will increase by $800.
• E)his consumption in period 1 will decrease by 14% and his consumption in period 2 will increase.

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Definitions:

Specific Amount

A precise quantity or financial figure identified within a transaction or financial statement, not generalized or estimated.

Deposit Ticket

This is a document that accompanies a bank deposit, listing the amounts of cash and checks being deposited and their respective details.

Negotiable Instrument

A document guaranteeing the payment of a specified amount of money, either on demand or at a set time, with the payer specified on the document.

Endorsement

Signing one's name on the back of a check or other document, authorizing its transfer or acceptance, or the act of publicly supporting a product, service, or candidate.