When Interest Rates Rise, the Substitution Effect Induces Savers to Save

question 147

True/False

When interest rates rise, the substitution effect induces savers to save more, whereas the income effect induces savers to save less.

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Definitions:

Surrounding Situation

The environmental and contextual factors that are currently present around an individual and can influence their behavior or actions.

Social Security

A government program designed to provide financial assistance and support to people with insufficient or no income, especially the elderly, disabled, and unemployed.

Retirement Finances

Financial planning and management concerning the period of life when one is no longer working, focusing on income sources, savings, and investment strategies.

Collectivism

A cultural system that values the needs of the group more than those of the individual self.