In the two-period model, suppose that current consumption is a normal good. If the interest rate increases, then the individual saving supply O A. depends on whether the individual is initially saving or borrowing O B. always increases if the individual is saving before the change in the interest rate •O C. decreases if in absolute value the substitution effect over current consumption is greater than the income effect. O D. increases if and only if in absolute value the income effect over current consumption is greater than the substitution effect

In the two-period model, suppose that current consumption is a normal good. If the interest rate increases, then the individual saving supply O A. depends on whether the individual is initially saving or borrowing O B. always increases if the individual is saving before the change in the interest rate •O C. decreases if in absolute value the substitution effect over current consumption is greater than the income effect. O D. increases if and only if in absolute value the income effect over current consumption is greater than the substitution effect

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter8: Aggregate Demand And The Powerful Consumer

Section: Chapter Questions

Problem 8DQ

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