For Consumers with a Binding Borrowing Constraint,a Decrease in the Real

question 23

Multiple Choice

For consumers with a binding borrowing constraint,a decrease in the real interest rate ________.

• A)decreases consumption now,and in the future
• B)increases consumption now,and in the future
• C)decreases consumption now,and increases future consumption
• D)has no impact on consumption

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Definitions:

Reactance

A motivational reaction to offers, persons, rules, or regulations that threaten or eliminate specific behavioral freedoms, prompting a desire to regain them.

Reactance Theory

A psychological theory suggesting that people have an aversive reaction to restrictions of their freedoms, leading to a motivation to regain them.

Forbidden Behaviors

Acts that are prohibited or discouraged within a society or group due to cultural, social, or legal norms and values.

Strict Parents

caregivers who enforce rigid rules and expect high levels of obedience and discipline from their children.