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:

Proposition

A statement or assertion that expresses a judgement or opinion that can be either true or false.

Connective

In logic and philosophy, a term or operator that connects two propositions or parts of a proposition, such as "and", "or", and "not".

Proposition

A statement that can either be true or false, used in logic to construct arguments or prove theories.

Connective

In logic and grammar, a word or expression that connects clauses or sentences, or the component that links elements within a proposition.