The Intertemporal Budget Constraint Basically States That

question 82

Multiple Choice

The intertemporal budget constraint basically states that:

• A) the present value of consumption must equal lifetime income only.
• B) total consumption equals total income.
• C) the present value of consumption must equal lifetime wealth.
• D) there is no future consumption because there is no future income.
• E) the present value of consumption is paid for by today's income only.

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Definitions:

Temporary Investments

Assets purchased with the intention to be sold in the short term for profit, such as stocks or bonds, not intended for long-term holding.

Held-to-maturity Securities

Financial instruments that an investor intends and is able to hold until maturity, carrying fixed or determinable payments and fixed maturity.

Noncurrent Assets

Assets expected to provide economic benefits beyond one year or the normal operating cycle of the business, including property, plant, and equipment, as well as intangible assets.

Unrealized Gains

Increases in the value of an asset that has not been sold yet, thus not resulting in actual cash flow or taxable income until the asset is sold.