The Impact of an Increase in the Real Interest Rate

Multiple Choice

The impact of an increase in the real interest rate on consumption

A) is difficult to measure since interest rates and income are moving simultaneously during the course of the business cycle.
B) tend to make consumers defer consumption due to the substitution effect.
C) tend to increase total consumption of individuals with positive wealth due to the income effect.
D) tend to decrease total consumption of individuals with negative wealth due to the income effect.
E) all of the above.