The Assumption That Current-Period Consumption Demand Is Negatively Related to the Real

Multiple Choice

The assumption that current-period consumption demand is negatively related to the real interest rate is justified as long as the

A) income effect dominates the substitution effect.
B) substitution effect dominates the income effect.
C) representative consumer is a borrower.
D) representative consumer is a lender.
E) income effect and substitution effects are equal.