In Irving Fisher's Two-Period Model, the Substitution Effect of an Increase

question 38

Multiple Choice

In Irving Fisher's two-period model, the substitution effect of an increase in the interest rate in the first period, for a saver, is the:

• A) decrease in the relative price of second-period consumption.
• B) additional income earned on first-period saving.
• C) decrease in the relative price of first-period consumption.
• D) additional income earned on second-period saving.

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Definitions:

Observable Behaviour

Actions or reactions that are visible and can be seen or measured directly, often used in the study of psychology and behavior analysis.

Expert Power

The influence and authority someone possesses due to their expertise, skills, or knowledge in a particular area.

Nobel Prize

Prestigious awards given annually in several categories including Peace, Literature, and various sciences, recognizing significant contributions.

Referent Power

A form of influence based on the charisma or attractiveness of the leader, inspiring others to identify and associate with them.