Asked by
khyana bullanday
on Oct 14, 2024
Verified
Mr.O.B.Kandle has a utility function c1c2, where c1 is his consumption in period 1 and c2 is his consumption in period 2.He has no income in period 2.If he had an income of $40,000 in period 1 and the interest rate increased from 10 to 12%,
A) his consumption in both periods would increase.
B) his savings would increase by 2% and his consumption in period 2 would also increase.
C) his consumption in both periods would decrease.
D) his savings would not change but his consumption in period 2 would increase by 400.
E) his consumption in period 1 would decrease by 12% and his consumption in period 2 would also decrease.
Utility Function
A mathematical expression that ranks preferences over a set of goods or outcomes, representing satisfaction or happiness derived from consumption.
Consumption
The act of using goods and services to satisfy needs and wants, which is a fundamental component of economics.
Income
The money received by an individual or business for services provided, products sold, or investments.
- Acquire knowledge on how changes in interest rates impact people's savings and expenditure patterns across distinct periods.
Verified Answer
JR
Learning Objectives
- Acquire knowledge on how changes in interest rates impact people's savings and expenditure patterns across distinct periods.