Intertemporal Budget Constraint

question 20

Multiple Choice

Intertemporal Budget Constraint
-Given the table above,suppose consumption in period two is $35,000.Then,the interest rate rises to five percent,and period-two consumption falls to $34,900.We may infer that ________.

• A)the income effect is stronger than the substitution effect
• B)the substitution effect is stronger than the income effect
• C)the substitution and income effects cancel out
• D)this consumer has a binding borrowing constraint

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Definitions:

Securities Act Of 1933

A U.S federal law enacted to ensure more transparency in financial statements so investors can make informed decisions about investments, and to establish laws against misrepresentation and fraudulent activities in the securities markets.

Registration Statement

A set of documents, including financial statements and a prospectus, filed with the Securities and Exchange Commission before a company offers securities for sale to the public.

Privity Of Contract

The principle that a contract imposes rights and obligations only on the parties to the contract, and not on any third parties.

Restatement Test

A doctrine used to reinterpret or clarify existing laws or legal principles, often through a secondary authoritative source that restates the law.