An intertemporal budget constraint
A) requires the present value of consumption to be equal to the present value of production.
B) requires total spending in each period to be equal to total consumption in each period.
C) does not take into account the ability to borrow or loan goods domestically.
D) categorizes income into permanent and temporary income.
E) limits consumption to the amount produced in each time period.

Question

Quizplus · Accepted Answer

An intertemporal budget constraint requires that the present value of consumption is equal to the present value of production, taking into account the ability to borrow or lend goods or money between time periods. This means that an individual or a firm must balance their consumption and production over time, accounting for the potential to borrow or save resources in different periods.

An Intertemporal Budget Constraint