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The interest rate does not affect the intertemporal budget constraint.
a. True
b. False

1 Answer

1 vote

Answer:

False

Step-by-step explanation:

The correct answer is false because the interest rate does affect the intertemporal budget constraint.

A higher interest rate, will cause the budget line to pivot upwards while a lower rate will make the budget line to pivot downward.

The intertemporal budget constraint can used to show a decision on how to save. It refers to the constraint which an individual encounters when making choices for the present and for the future. It reflects a consumer's decision on the amount to consume in the present and the amount to save in the future.

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