In Irving Fisher's Two-Period Model, If the Consumer Is Initially

question 47

Multiple Choice

In Irving Fisher's two-period model, if the consumer is initially saving in period one and the real interest rate rises, then:

• A) both the income and substitution effects will make the consumer want to consume less in period one.
• B) both the income and substitution effects will make the consumer want to consume more in period one.
• C) the substitution effect will make the consumer want to consume less in period one but the income effect will make him or her want to consume more.
• D) the income effect will make the consumer want to consume less in period one, but the substitution effect will make him or her want to consume more.

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