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Changes in Future Expected Interest Rates Can Affect Current Consumption

question 17

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Changes in future expected interest rates can affect current consumption.Suppose individuals expect future interest rates to decrease.Consumption will change as a result of this lower expected future interest rate because of its effects on which of the following?


Definitions:

Budget Line

A graphical representation showing the combination of two goods that a consumer can purchase with a given income, at specified prices.

Price

The total money calculated, demanded, or paid in exchange for something.

Money Income

The total earning or revenue received by an individual or household, including wages, salaries, benefits, and other monetary sources.

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