A) 100 B)1000 C)3600 D)5000 A)1 B)4 C)16 D)25 3. The present value of $1 payable

Question

A) 100
B)1000 C)3600 D)5000
A)1 B)4 C)16 D)25
3. The present value of $1 payable in the future decreases A) the higher r is and the sooner it is to be paid.
B) the lower r is and the sooner it is to be paid.
C) the higher r is and the longer time until it is paid.
D) the lower r is and the longer time until it is paid.

4. The two-period budget line for incomes Y1 and Y2 and consumption C1 and C2 can be written as C2 = Y1 (1 + r) + Y2 - (1 + r) C1, if the interest rate were to fall the budget line would A) shift to the left in a parallel fashion
B) shift to the right in a parallel fashion
C) rotate counter-clockwise pivoting on Y1, Y2
D) rotate clockwise pivoting on Y1, Y2
5. Suppose an individual has a fixed amount of wealth to allocate between consumption in two periods (C1 and C2). Any funds not spent in period 1 will earn interest (at the rate r), which will increase purchasing power in period 2. Consider four possible reactions to an increase in r: I. C1 increases. II. C1 decreases. III. C2 increases. IV. C2 decreases.
Which of these is consistent with the hypothesis that both C1 and C2 are normal goods? A) II and III, but not I and IV.
B) I, II, and IV, but not III.
C) I, III, and IV, but not II.
D) I, II and III, but not IV.







3. The present value of $1 payable in the future decreases A) the higher r is and the sooner it is to be paid.
B) the lower r is and the sooner it is to be paid.
C) the higher r is and the longer time until it is paid.
D) the lower r is and the longer time until it is paid.

4. The two-period budget line for incomes Y1 and Y2 and consumption C1 and C2 can be written as C2 = Y1 (1 + r) + Y2 - (1 + r) C1, if the interest rate were to fall the budget line would A) shift to the left in a parallel fashion
B) shift to the right in a parallel fashion
C) rotate counter-clockwise pivoting on Y1, Y2
D) rotate clockwise pivoting on Y1, Y2
5. Suppose an individual has a fixed amount of wealth to allocate between consumption in two periods (C1 and C2). Any funds not spent in period 1 will earn interest (at the rate r), which will increase purchasing power in period 2. Consider four possible reactions to an increase in r: I. C1 increases. II. C1 decreases. III. C2 increases. IV. C2 decreases.
Which of these is consistent with the hypothesis that both C1 and C2 are normal goods? A) II and III, but not I and IV.
B) I, II, and IV, but not III.
C) I, III, and IV, but not II.
D) I, II and III, but not IV.







3. The present value of $1 payable in the future decreases A) the higher r is and the sooner it is to be paid.
B) the lower r is and the sooner it is to be paid.
C) the higher r is and the longer time until it is paid.
D) the lower r is and the longer time until it is paid.
3. The present value of $1 payable in the future decreases
4. The two-period budget line for incomes Y1 and Y2 and consumption C1 and C2 can be written as C2 = Y1 (1 + r) + Y2 - (1 + r) C1, if the interest rate were to fall the budget line would A) shift to the left in a parallel fashion
B) shift to the right in a parallel fashion
C) rotate counter-clockwise pivoting on Y1, Y2
D) rotate clockwise pivoting on Y1, Y2
5. Suppose an individual has a fixed amount of wealth to allocate between consumption in two periods (C1 and C2). Any funds not spent in period 1 will earn interest (at the rate r), which will increase purchasing power in period 2. Consider four possible reactions to an increase in r: I. C1 increases. II. C1 decreases. III. C2 increases. IV. C2 decreases.
Which of these is consistent with the hypothesis that both C1 and C2 are normal goods? A) II and III, but not I and IV.
B) I, II, and IV, but not III.
C) I, III, and IV, but not II.
D) I, II and III, but not IV. A) shift to the left in a parallel fashion
B) shift to the right in a parallel fashion
C) rotate counter-clockwise pivoting on Y1, Y2
D) rotate clockwise pivoting on Y1, Y2
5. Suppose an individual has a fixed amount of wealth to allocate between consumption in two periods (C1 and C2). Any funds not spent in period 1 will earn interest (at the rate r), which will increase purchasing power in period 2. Consider four possible reactions to an increase in r: I. C1 increases. II. C1 decreases. III. C2 increases. IV. C2 decreases.
Which of these is consistent with the hypothesis that both C1 and C2 are normal goods?








I. C1 increases. II. C1 decreases. III. C2 increases. IV. C2 decreases.

Explanation / Answer

1.A

2.C

3.C

4.A

5A

1.EQUATE MPl(marginal product of labour) = 1/W

2. same as 1st

3.higher the r and longer the period more the value of monet decreases

4.as r decreases since Y > C

So net net value decreases .so it shifts parallely to left

5 A normal consumer will consume less in present and save for future .Therefore less consumption in present and more in future

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