When making intertemporal resource allocations, substitution of consumption in the next period for consumption in the current period is called:
A)the marginal rate of time preference.
B)the borrowing rate.
C)risk preference.
D)the marginal rate of substitution.

Question

Quizplus · Accepted Answer

The substitution of consumption in the next period for consumption in the current period is a reflection of the individual's preference for consumption at different points in time, which is captured by the concept of time preference. The marginal rate of time preference represents the rate at which an individual is willing to trade off consumption in one period for consumption in another period. Therefore, A is the correct answer. The borrowing rate and risk preference may be important factors in intertemporal resource allocation decisions but are not directly related to the substitution of consumption across time. The marginal rate of substitution is a concept in microeconomics that reflects the rate at which an individual is willing to trade one good for another and is not directly applicable to intertemporal resource allocation decisions.

When Making Intertemporal Resource Allocations, Substitution of Consumption in the Next