The Impact of an Increase in the Real Interest Rate

question 52

Multiple Choice

The impact of an increase in the real interest rate on consumption

• A) is difficult to measure since interest rates and income are moving simultaneously during the course of the business cycle.
• B) tend to make consumers defer consumption due to the substitution effect.
• C) tend to increase total consumption of individuals with positive wealth due to the income effect.
• D) tend to decrease total consumption of individuals with negative wealth due to the income effect.
• E) all of the above.

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