Ben earns $6,600 this year and zero income the next year. Ben also has an investment opportunity in which he can invest $2,900 and receive $6,200 next year. Suppose Ben consumes $2,600 this year, invests in the project, and consumes $7,394 next year. a. What is the market rate of interest? (Hint: The new market interest rate line EF is parallel to AH.) Market rate % b-1. Suppose the interest rate increases. What will happen to Ben's consumption for this year? If interest rate increases, Ben's consumption (Click to select) ✓ b-2. Is Ben better off or worse off than before the interest rate rise? Ben is (Click to select) off than before the interest rise.

Ben earns $6,600 this year and zero income the next year. Ben also has an investment opportunity in which he can invest $2,900 and receive $6,200 next year. Suppose Ben consumes $2,600 this year, invests in the project, and consumes $7,394 next year. a. What is the market rate of interest? (Hint: The new market interest rate line EF is parallel to AH.) Market rate % b-1. Suppose the interest rate increases. What will happen to Ben's consumption for this year? If interest rate increases, Ben's consumption (Click to select) ✓ b-2. Is Ben better off or worse off than before the interest rate rise? Ben is (Click to select) off than before the interest rise.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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Ben earns $6,600 this year and zero income the next year. Ben also has an investment opportunity in which he can invest $2,900 and
receive $6,200 next year. Suppose Ben consumes $2,600 this year, invests in the project, and consumes $7,394 next year.
a. What is the market rate of interest? (Hint: The new market interest rate line EF is parallel to AH.)
Market rate
%
b-1. Suppose the interest rate increases. What will happen to Ben's consumption for this year?
If interest rate increases, Ben's consumption [(Click to select)
b-2. Is Ben better off or worse off than before the interest rate rise?
Ben is (Click to select) off than before the interest rise.

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