If the Euler equation did not hold, then:
A) the real interest rate would be zero
B) a consumer would not spend all of his or her lifetime wealth
C) a consumer could move consumption from one period to another and increase lifetime utility
D) the consumer has spent more than his or her lifetime wealth
E) None of these answers are correct.

Question

Quizplus · Accepted Answer

If the Euler equation did not hold, it would imply that consumers could reallocate consumption across periods to achieve higher lifetime utility, indicating a suboptimal consumption path.

If the Euler Equation Did Not Hold, Then