QUESTION 1

A normal good is a good that:

1. provides pleasure.
2. would generally be owned by an average household.
3. has a value greater than zero.
4. is desired in larger quantities by a consumer when his or her income rises.

question 2

In Irving Fisher's two-period consumption model, if Y1 = 15,000, Y2 = 20,000, the interest rate r is 0.50 (50 percent), and there is a constraint on borrowing that is binding, then C2 equals:

1. 20,000.
2. 22,500.
3. 35,000.
4. 42,500.

question 3

A consumer's budget constraint for two periods with positive interest rate r may be represented by the equation:

1. C1 + C2 = Y1 + Y2.
2. C1 + C2/(1 + r) = Y1 + Y2/(1 + r).
3. C1 + C2(1 + r) = Y1 + Y2(1 + r).
4. C1/(1 + r) + C2 = Y1/(1 + r) + Y2.