Question

1 The relative price of current consumer goods and future consumer goods is ()

A 1 + r

B 1 / (1 + r)

C r

D 1

2 In the intertemporal model, consumer diversity preferences are reflected in ()

A The more current consumption and the future consumption, the better

B. The more types of current and future consumer goods, the better

C The closer the current consumption and the future consumption are, the better

D Current consumption and future consumption increase with income

3 The conditions for consumer consumption-saving to achieve the optimal choice are ()

A MRSc, l = 1 + r

B MRSc, c '= 1 / (1 + r)

C MRTc, c '= 1 + r

D MRSc, c '= 1 + r

4 In the intertemporal model, the current income of consumers increases, the following statement is wrong ()

A Consumer's current consumption increases

B Consumer's current savings increase

C When the consumer is a borrower, the current consumption decreases

D Consumers' future consumption increases

Answer 1

1 The relative price of current consumer goods and future consumer goods is ()

let c1 be current consumer goods and c2 be future consumer goods. y be current income and no future income is there. therefore, y is total income in two periods.

savings today s1 = y-c1

if the rate of return on savings is r, savings s1 today will yield a return of r.s1 in future. so we would have s1+rs1 amount, to purchase c2. with no income in future, c2 = s1+rs1 = s1(1+r)

c2 = (y-c1)(1+r) as s1 = y1 - c1

c2/1+r = y - c1

c1+ c2/1+r = y

also, assuming that there are only two periods and there will be mo savings in future, then total consumption has to be equal to total income which is c1+ c2/1+r = y

if Y is total income, c1+ c2/1+r = y is the budget constraint, then thus, price of c1 p1= 1 and price of 2 p2= 1/(1+r)

relative price of current consumer goods and future consumer goods is p1/p2 = 1/(1/(1+r)) = 1+r

based on this explaination, we can say that

A 1 + r is the correct answer.

B 1 / (1 + r) incorrect

C r incorrect

D 1 incorrect