SOLVED

16) Along any single indifference curve the ________. A) consumer is equally satisfied any and all of the combinations of goods being consumed. B) level of current income is unchanged. C) level of future income is unchanged. D) level fo current and future income is unchanged. 17) Indifference curves describe ________. A) the relationship between current and future income. B) the utility received by an individual consumer. C) the relationship between utility and income. D) productivity levels. 18) The rate at which a consumer is willing to give up consumption in one period for additional consumption in another is known as ________. A) the marginal propensity to save. B) the marginal propensity to consume. C) the marginal rate of substitution. D) the average propensity to consume. 19) The equation MRS = 1 + r means that ________. A) consumers prefer to avoid fluctuations in consumption B) at the margin, consumption grows at the real interest rate C) any movement along the budget constraint would cause a decrease in the consumer’s utility D) consumer utility is a positive function of the real interest rate 1) A rightward shift in the intertemporal budget line would be caused by ________. A) an increase in future income and wealth. B) an increase in future income and a decrease in wealth. C) a decrease in future income and an increase in wealth. D) a decrease in future income and wealth. 2) Consumption smoothing is a logical consequence of ________. A) basing decision-making on real rather than nominal interest rates. B) the convexity of indifference curves and the ability to borrow and lend. C) the negative slope fo the intertemporal budget constraint. D) rational expectations. 3) Consumption smoothing refers to ________. A) the impact of future income on current consumption and of current income on future consumption B) the constancy of consumption over time C) the impact of current consumption on future income and of future consumption on current income D) the tendency of consumers to adopt similar spending habits 4) Typically, consumers respond to an increase in (expected) future income by ________. A) shifting the budget constraint to the left B) increasing both current and future consumption C) saving more to increase future wealth D) waiting until the income is received before changing their consumption behavior 5) Assuming a real interest rate of four percent, which of these causes the largest increase in the present value of lifetime resources? A) a winning lottery ticket that pays $9,600 today B) an additional $10,000 of income in the future period C) a salary increase of $5,000 both today and in the future period D) an additional $10,000 of current wealth  6) Using the table above, and assuming no bequest, what amount of consumption is chosen in period 1, if the consumer wants consumption in the two periods to be equal? If initial wealth is $40,000, what amount of consumption is equal over the two periods?