If the Substitution Effect Is Greater Than the Income Effect

question 2

Multiple Choice

If the substitution effect is greater than the income effect, a decrease in interest rates will

• A) increase saving and decrease consumption spending by households.
• B) decrease saving and increase consumption spending by households.
• C) decrease both saving and consumption spending by households.
• D) increase both saving and consumption spending by households.

---

Definitions:

Dorsal Nerve Root

A bundle of nerve fibers that branch off the spinal cord and transmit sensory information from the body to the brain.

Chickenpox

Chickenpox is a highly contagious viral infection causing an itchy rash and red spots or blisters all over the body, primarily affecting children.

Epidermis

The outermost layer of skin that acts as a protective barrier against environmental elements, pathogens, and water loss.