Suppose That the Interest Rate Paid to Savers Increases

question 93

Multiple Choice

Suppose that the interest rate paid to savers increases.As a result,Tom wishes to save less.This suggests that,for Tom,

• A) the substitution effect is greater than the income effect.
• B) the income effect is greater than the substitution effect.
• C) utility maximization is not occurring.
• D) future consumption is a luxury.