The income effect of an increase in the interest rate will result in an increase in consumption when
a. young and an increase in savings when young.
b. old and an increase in savings when young

Concern about an international crisis has caused consumers to save their money and postpone big purchases. What is the effect on aggregate demand and aggregate supply?

(A) Both aggregate demand and aggregate supply will decrease, leading to lower real GDP. (B) Aggregate demand will decrease, lowering both real GDP and the price level. (C) Aggregate supply will decrease, raising the price level and lowering real GDP. (D) No change on aggregate demand and aggregate supply.

If the reserve ratio was 100 percent, then:

A. maximum lending would occur. B. banks would create money in the economy. C. banks would lend all of their deposits. D. no lending would occur using deposits.