The intertemporal budget constraint is defined as: A)D_P + D_F/(1 + r)= Q_P + Q_F/(1 + r) B)V = Q_P + Q_F/(1 + r) C)V = D_P + D_F/(1 + r) D)D_F + D_P/(1 + r)= Q_F + Q_P/(1 + r) E)D_P + D_F(1 + r)= Q_P + Q_F(1 + r)

Question

Quizplus · Accepted Answer

The intertemporal budget constraint states that the present value of consumption today and in the future must equal the present value of income today and in the future. In this case, the present value of consumption today is D_P, the present value of consumption in the future is D_F/(1 + r), the present value of income today is Q_P, and the present value of income in the future is Q_F/(1 + r). Therefore, the intertemporal budget constraint is defined as D_P + D_F/(1 + r) = Q_P + Q_F/(1 + r).

The Intertemporal Budget Constraint Is Defined As