Question 1 1 pts Consumption smoothing refers to C} the tendency of all consumers to choose the same amount of current consumption. C} the tendency of consumers to seek a consumption path over time that is smoother than their income path. C} the tendency of consumers to seek an income path over time that is smoother than their consumption path. C} consumer's concerns about going too heavily into debt. ' Question 2 1 pts Why don't consumers work in the two period model? C) It is a convenient simplication that allows us to focus on other concepts. C) it would make no difference to the model if consumers could work. C) People who participate in real-world credit markets do not work. C) We don't know how to include workers and wage income in the model. ' Question 3 1 pts The endowment point is the consumption bundle in which C} current period consumption is equal to zero. C} future period consumption is equal to zero. C} the consumer maximizes utility. C} consumption is equal to disposable income in each period. 3 Question 4 For a lender. an increase in the real interest rate Q denitely.r reduces current consumption and increases future consumption. C) reduces current consumption and has an uncertain effect on future consumption. 0 has an uncertain effect on current consumption and increases future consumption. C) has an uncertain effect on both current and future consumption. For a borrower, an increase in the real interest rate C} denitely,r reduces current consumption and increases future consumption. {3: reduces current consumption and has an uncertain effect on future consumption. 0 has an uncertain effect on current consumption and increases future consumption. C} has an uncertain effect on both current and future consumption. D Question 6 1 pts The government's present value budget constraint states that O taxes must equal government spending in each period. O total government spending must equal total tax revenue. O the present value of government spending must equal to present value of taxes. O the government may run deficits each year, as long as the deficits are sufficiently small.Question 7 1 pts The Ricardian equivalence theorem implies that O government debt policy must be handled correctly in order for the economy to prosper. O the amount of government spending in the economy is neutral. O an increase in government spending has no effect on the economy as long as there is an equal change in taxes. O the timing of taxes collected by the government is neutral under certain conditions