econ 301 test 1 appeal

econ 301 test 1 appeal - future consumption has become less...

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Bryce Nyeggen 902 991 1105 Test appeal #6: I believe my answer was a correct description of the situation described by the graph even though it did not directly reference a visual depiction. An increase in the opportunity cost of current consumption is what is taking place - after the rise in interest rates, additional current consumption sacrifices more future consumption than before. Saying something is less attractive is essentially the same thing as saying the consumer desires to do less of it; since additional
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Unformatted text preview: future consumption has become less attractive than before and the consumer chose not to buy any to begin with, they should not buy any after the fact. The bit about betting on T-bills was partially a joke and partially a reflection of the fact that it is possible to imagine a situation where a change in interest rates has effects beyond altering the slope of the budget line, like altering the utility function. In any case it was stated as extraneous and not relevant under normal conditions....
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This note was uploaded on 07/28/2010 for the course ECON 301 taught by Professor Hansen during the Fall '08 term at University of Wisconsin.

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