Question

1. If the real interest rate is denoted by p, the present value of consumption in an intertemporal choice model of two periods is given by? a) ci +c2/(1+p) b) c1 (1-)+c7/(1-P) c) ci/(1+p) +c2/(1-P) d) ci tc2 2. The household's rate of time preference is given by a) the slope of the budget constraint. b) the slope of the indifference curves. c) the real rate of interest. d) the slope of the 45° line. 3. According to Keynes, the main determinant of the consumption level is a) current income. b) initial wealth. c) permanent income. d) the rate of interest. 4. Transitory income is a) average annual income over one's lifetime. b) the difference between actual income and permanent income. c) income generated by the assets. d) the sum of labour income and the returns on assets. 5. According to the life cycle theory, a) the MPC out of labour income is low when the household is young. b) the MPC out of assets is low when the household is old. c) the MPC out of labour income is constant over the lifetime. d) the MPC out of assets depends on the age of the household. 6. Making investments with borrowed funds to make profits is called a) leverage. b) arbitrage. c) spread d) speculation

Answer 1

Page No. Date : Red Internent rate is (p). det (ci) is the Cal is the consumption in period (1). consumption is period (al. Citp/ The price of consumption in Period (2) is the interent foregone. So, ( ) is the price of consumption in period (2). Therefore, present value of consumption is So Right answer is (a), Note. Tutors are Question only According to HOMEWORKLIB POLICY entitled to answer first among the all Questionn.