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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Describe the effect of each of the following events on individuals’ rate of time preference and thus on interest rates:

  1. a. A technological advance that increases longevity
  2. b. An increased threat of war
  3. c. Growing older

(a)

To determine

Identify the effect of advanced technology on the people’s rate of time preference and on the interest rate.    

Explanation

Generally, people have a positive rate of interest, which means the preference for earlier availability of goods and services over the later availability of goods and services. However, if the advanced technology lasts for the long life of goods and services, then people will prefer to reduce the present consumption to the future consumption. As a result, the individual’s time preference will decrease...

(b)

To determine

Identify the effect of an increased threat of war on the people’s rate of time preference and on the interest rate.    

(c)

To determine

Identify the effect of growing older on the people’s rate of time preference and on the interest rate.    

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