If Suzette responds to an increase in the interest rate by decreasing her saving, then, for Suzette,
a. the increase in the interest rate creates an income effect that is greater than the substitution effect.
b. the increase in the interest rate creates a substitution effect that is greater than the income effect.
c. consumption when young and consumption when old are perfect substitutes.
d. consumption when young and consumption when old are perfect complements.
a
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If a product has very few substitutes, demand elasticity is likely to be
A) 1. B) elastic. C) infinitely elastic. D) inelastic.
If the Federal Reserve decided to include virtual money like Bitcoins in its measure of the money supply, what would be the effect on M1 or M2?
A) M1 would rise. B) M1 would rise and M2 would remain constant. C) M2 would rise but M1 would remain constant. D) M1 would fall.