In the two-period model, suppose a household's income in the first period is $40,000, income in the second period is $50,000, and the real interest rate is 25 percent. A sudden shock leads to an increase in the household's income in the first period to $45,000 and a decrease in the household's income in the second period to $43,750. The household is ____ in the new situation.
A. better off
B. worse off
C. equally well off
D. possibly better off and possibly worse off
Answer: C
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Answer the following statement true (T) or false (F)
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