williamson_MCQ_ch8

# williamson_MCQ_ch8 - Chapter 8 A Two-Period Model The...

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Chapter 8 A Two-Period Model: The Consumption-Savings Decision and Ricardian Equivalence T Multiple Choice 1. Consumption smoothing refers to (a) the tendency of all consumers to choose the same amount of current consumption. (b) the tendency of consumers to seek a consumption path over time that is smoother than income. (c) the tendency of consumers to seek an income path over time that is smoother than consumption. (d) consumer’s concerns about going heavily into debt. Answer: B 2. Intertemporal decisions involve economic decisions (a) made within a given period of time. (b) made in between two periods of time. (c) involving tradeoffs across periods of time. (d) that ignore concerns about the future. Answer: C 3. The simplest device to analyze dynamic decisions is a (a) one-period model. (b) two-period model. (c) model that includes only the number of years of a typical consumer’s lifetime. (d) continuous time model. Answer: B 4. For all bonds to be indistinguishable,

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Chapter 8 A Two-Period Model: The Consumption-Savings Decision and Ricardian Equivalence 59 5. A one-period bond is a promise to repay 6. The consumer’s lifetime budget constraint states that 7. The endowment point is the consumption bundle in which (a) first-period consumption is equal to zero. (b) second-period consumption is equal to zero. (c) the consumer finds the most utility. (d) consumption is equal to disposable income in each period. Answer: D 8. If we represents a two-period consumer’s lifetime wealth and r denotes the real rate of interest, the vertical (future consumption) intercept of the consumer’s budget line is equal to we r + +
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