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The horizontal intercept of the intertemporal budget constraint is referred to as the A.present value of...

The horizontal intercept of the intertemporal budget constraint is referred to as the

A.present value of lifetime income.

B.the future value of lifetime income.

C.the current value of future income.

D.the future value of present income.

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Answer #1

Option A.

  • The horizontal intercept of the intertemporal budget constraint is referred to as the present value of lifetime income.
  • The intertemporal budget constraint specifies the constraint faced by a decision maker when making choices regarding future and present spending of income.
  • According to the intertemporal budget constraint, the present value of lifetime income must always exceed the present value of consumption.
  • The horizontal axis of this constraint specifies the present value of lifetime income and the vertical axis specifies the utility preference or the present value of consumption.
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