When Interest Rates Decrease, the Substitution Effect Suggests That Individuals

question 179

Multiple Choice

When interest rates decrease, the substitution effect suggests that individuals will

• A) consume more today.
• B) save more today.
• C) consume more in the future.
• D) save more and consume less today.

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Definitions:

Business Revenue

The total amount of income generated by a company from its activities, such as sales of products or services, before any expenses are subtracted.

Schedule E

A form used for reporting income from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs on a tax return.

Investment Expenses

Fees and other costs incurred in connection with the management and operation of investments.

Net Income

The amount of earnings a company or individual has after subtracting all expenses, taxes, and deductions from total revenue.