A consumer receives his income in two periods, can save orborrow, and views a unit of

consumption in period 1 as a perfect substitute (one for one)for a unit of consumption in period 2.

If the nominal interest rate is 5% and the inflation rate is6%, the consumer will:

a. Consume only in period 1.

b. Consume only in period 2.

c. Consume equal amounts in each period.

d. Consume more in period 1 than in period 2 if incomeelasticity exceeds 1.

e. Equalize expenditures but not consumption in the twoperiods.