Assume that we are modeling inter-temporal consumption for a typical consumer. Further assume that we measure current consumption on the horizontal axis and future consumption on the vertical axis. A market exists where borrowing and lending can occur for a fixed interest rate, r. When the rate at which a consumer can borrow is higher than the rate at which the consumer can lend, the consumer's budget constraint is composed of two straight lines with different slopes.

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This statement is true. When the interest rate for borrowing is higher than the interest rate for lending, the consumer's budget constraint will have two different slopes, reflecting the different cost of consumption today versus consumption in the future. This is because when the borrowing rate is higher than the lending rate, the consumer will borrow more and will have a higher future consumption and therefore a steeper slope for the borrowing line, while the lending line will have a shallower slope as the consumer is not incentivized to lend. Therefore, the budget constraint will have two straight lines with different slopes.

Assume That We Are Modeling Inter-Temporal Consumption for a Typical