Michael Faces Tradeoffs Between Consuming in the Current Period When

Multiple Choice

Michael faces tradeoffs between consuming in the current period when he is young and consuming in a future period when he is old. Michael experiences a decrease in the current interest rate he earns on his savings. Michael will save

A) less in the current period if the substitution effect is greater than the income effect.
B) less in the current period if the income effect is greater than the substitution effect.
C) more in the current period if the substitution effect is greater than the income effect.
D) more in the current period, regardless of the sizes of the income and substitution effects.