Question

5 In the intertemporal model, the real interest rate increases, the following statement is wrong ()

A budget constraint line is steeper

B Consumer endowment points change

C. The

present value of the consumer ’s lifetime wealth decreases

D consumers will increase current consumption

6 In the intertemporal model, the effect of increasing real interest rates on lenders is ()

A Current consumption increases, future consumption increases

B. Current consumption decreases, future consumption increases

C Current consumption is uncertain, and future consumption will increase

D Current savings decrease, future consumption increases

7 In the intertemporal model, the effect of real interest rate increases on borrowers is ()

A. Current consumption decreases, future consumption increases

B Current consumption is uncertain, future consumption will increase

C Current consumption is uncertain, and future consumption will decrease

D Current savings increase, future consumption is uncertain

8 Under the condition that Ricardo is equivalently established, if the government raises current taxes, the following statement is wrong ()

A Consumer's consumption decision remains unchanged

B. Endowment point changes for consumers

C The real interest rate of the credit market will increase

D. The number of bond issuances in the credit market decreased

Answer 1

Answer:

5. D consumer will increase current consumption

Explanation: It is wrong because as real interest rate increases, consumer will reduce current consumption and save more for consumptions in future periods.

6. B Current consumption decreases, future consumption increases.

Lenders will lend more as rate of interest increases, thus, current consumption decreases and future consumption increases.

7. C current consumption is uncertain, whereas future consumption will decrease.

Explanation: Increase of rate of interest in not favourable for borrowers, thus future consumption will decrease and current consumption is uncertain

8. A. consumer's consumption remained unchanged.

Explanation: As tax increase, consumption of consumer changes as tax increase leads to change in disposable income.