1. In the two-period model, the budget constraint is kinked for all of these reasons, except
A) the real interest rate is greater than zero.
B) there are costs to banks from lending and borrowing.
C) there is asymmetric information in the credit market.
D) there is limited commitment in the credit market.
2. For a consumer not bound by the collateral constraint, an increase in the present value of the collateral leads to
A) nothing.
B) an increase in current consumption and a decrease in future consumption.
C) an increase in current consumption and no change in future consumption.
D) an increase in both current and future consumption.