As long as both current and future consumption are normal goods, a decrease in the interest rate will result in a drop in savings.
Answer the following statement true (T) or false (F)
False
Rationale: A decrease in the interest rate will cause a substitution effect that points in the direction of less savings but a wealth effect that points in a direction of more savings. Which dominates depends on the size of the substitution effect relative to the wealth effect.
Economics
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Which of the following institutions is eligible to borrow from the Federal Reserve at the discount rate?
A) Property and casualty insurance companies B) Money market mutual funds C) Credit unions D) Investment banks
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In the balance of payments, any transaction that leads to a receipt by a resident of a country is a
A) minus item. B) debit item. C) surplus item. D) deficit item.
Economics