Multiple Choice
An individual is considering consumption in two periods.He has decided to borrow $1,000 in period 1,given his endowment and the interest rate.Other things remaining the same,if the interest rate increases,he will:
A) borrow less than $1,000.
B) continue to borrow $1,000.
C) borrow more than $1,000.
D) borrow more or less depending upon whether or not the substitution effect of the change is greater than the income effect.
Correct Answer:
Verified
Correct Answer:
Verified
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