If in Your Lifetime Utility Function, Then

question 101

Multiple Choice

If in your lifetime utility function, then:

• A) your utility function displays increasing marginal returns.
• B) you are risk averse.
• C) you prefer utilities received today relative to the future.
• D) you prefer utilities received in the future relative to today.
• E) Not enough information is given.

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Definitions:

Present Value

The value today of a sum of money or cash flows expected in the future, discounted by a specific rate of return.

Interest Rate

The percentage charged on a loan or paid on deposits over a specific period of time, reflecting the cost of borrowing or the return on savings.

Consumes

The act of using up a resource or goods in the process of satisfying human needs or wants.

Utility Function

A utility function is a mathematical representation that assigns a level of utility or satisfaction to combinations of goods and services consumed.