Assume That an Increase in Consumer Confidence Raises Consumers' Expectations

question 116

Multiple Choice

Assume that an increase in consumer confidence raises consumers' expectations of future income and thus the amount they want to consume today for any given income. This shift, in a neoclassical economy, will:

• A) lower investment and raise the interest rate.
• B) raise investment and lower the interest rate.
• C) lower both investment and the interest rate.
• D) raise both investment and the interest rate.

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