Suppose an individual experiences a 20,000 increase in real ...

[jjjetplane]

Suppose an individual experiences a 20,000 increase in real income and the individual believes this increase in income is permanent. Economic theory suggests that this individual's current consumption will
 
  A) remain unchanged.
  B) increase by more than 20,000.
  C) increase by at most 20,000.
  D) decrease or remain unchanged, depending on the value of the real interest rate.
  E) decrease, remain unchanged, or increase, depending on the value of the real interest rate.

Question 2

With a nominal interest rate of 10 per year, the present discounted value of 200 to be received in two years is
 
  A) 82.64.
  B) 90.91.
  C) 165.29.
  D) 181.82.
  E) 220.00.

[dellikani2015]

Answer to Question 1

C

Answer to Question 2

C