Q.

If, for John’s current intertemporal consumption pattern (satisfying his intertemporal budget constraint), his marginal rate of intertemporal substitution is 1 and the real rate of interest is positive, then...

A. the interest rate will fall to zero.
B. john could increase his lifetime utility by consuming more today.
C. john could increase his lifetime utility by consuming less today.
D. john is necessarily a borrower.
Answer» C. john could increase his lifetime utility by consuming less today.
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