Suppose That the Interest Rate Paid to Savers Increases

question 4

Multiple Choice

Suppose that the interest rate paid to savers increases.As a result,Tom wishes to save more.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.

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Definitions:

Homo Habilis

An extinct species of early human that lived about 2.4 to 1.4 million years ago, known for using stone tools.

Human Evolution

The lengthy process of change by which people originated from apelike ancestors, characterized by developments such as bipedalism, larger brains, and other traits.

Denisovans

An extinct species or subspecies of archaic humans in the genus Homo, known primarily from their DNA extracted from fossil remains found in Siberia.

Neanderthals

An extinct species of human, closely related to modern humans, that lived in Europe and parts of Asia until approximately 40,000 years ago.