Final answer:
Answer choice c is correct: borrowing increases future income and investing sacrifices current income with the expectation of greater future income. This relates to intertemporal choices and the effects of interest rate changes on future and current consumption.
Step-by-step explanation:
The student's question appears to be about how certain financial actions affect income and consumption over time, specifically in the context of intertemporal choices. The correct answer to the question 'Borrowing…. to increase…. Investing…. in exchange for…. in the future' is answer choice c. Borrowing increases future income; investing sacrifices current income; this is done in expectation of greater expected income in the future. This assessment of future versus current consumption is based on the interplay between the substitution effect and the income effect of interest rate changes.
When interest rates increase, the substitution effect encourages saving for future consumption because the opportunity cost of current consumption has risen. Consequently, future consumption becomes relatively less expensive as more savings now will lead to more consumption in the future, which is to say that current consumption is sacrificed. On the other hand, the income effect implies that an individual can afford more consumption in both the present and future as a result of the increased income from interest.
An increase in expected income shifts the intertemporal budget constraint outward, likely encouraging an increase in both current consumption and saving, with the actual behavior depending on one's time preference.