Which of the following does the Euler equation state?
A) "The total supply of money is equal to nominal GDP divided by velocity."
B) "The real interest rate is the nominal interest rate minus inflation."
C) "A consumer must be indifferent between consuming one more unit today or in the future."
D) "The present value of government's spending must equal the present value of receipts."
E) "Consumption is a function of permanent income."

Question

Quizplus · Accepted Answer

The Euler equation states that a consumer must be indifferent between consuming one more unit today or in the future. This is a fundamental concept in intertemporal decision making and is a cornerstone of macroeconomic theory.

Which of the Following Does the Euler Equation State