An Increase in the Real Interest Rate Is an Example

Multiple Choice

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

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