If an Increase in the Interest Rate Lowers Savings, Then

question 474

Multiple Choice

If an increase in the interest rate lowers savings, then

• A)the substitution effect is greater than the income effect.
• B)the income effect is greater than the substitution effect.
• C)the income effect and the substitution effect move in the same direction.
• D)we are unable to determine the sizes of the income and substitution effects without more information.

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