The left-hand side of the Euler equation, , represents the:
A) growth rate of income.
B) total lifetime consumption, in dollars.
C) lifetime utility function.
D) discount factor.
E) growth rate of consumption.

Question

The left-hand side of the Euler equation,  , represents the:
A) growth rate of income. 
B) total lifetime consumption, in dollars. 
C) lifetime utility function. 
D) discount factor. 
E) growth rate of consumption.

Quizplus · Accepted Answer

The left-hand side of the Euler equation represents the growth rate of consumption (i.e. the change in consumption from one period to the next, expressed as a percentage of current consumption).

The Left-Hand Side of the Euler Equation, , Represents