An Increase in the Real Interest Rate Is an Example

question 59

Multiple Choice

An increase in the real interest rate is an example of a

• A) pure substitution effect.
• B) substitution effect and a positive income effect.
• C) substitution effect and a negative income effect.
• D) substitution effect and an income effect whose sign depends on whether the consumer is initially a borrower or a lender.
• E) positive substitution effect and a negative income effect.

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Definitions:

Dimethylpropane

A branched alkane with the formula C5H12, also known as isopentane, a component of some fuels.

Methyloctane

A type of hydrocarbon compound characterized by its chemical structure that includes an octane backbone with a methyl group attached.

Condensed Structural Formula

A condensed structural formula is a method of describing the elements or molecules that compose a compound and their arrangement in a compact form without drawing full structural diagrams.

Dimethylbutane

An organic compound with the formula C6H14, a type of alkane that is used as a fuel.