Multiple Choice
In a two-year period,if a higher interest rate causes consumption in year 1 to rise:
A) the income effect associated with the higher interest rate is greater than the substitution effect.
B) the substitution effect associated with the higher interest rate is greater than the income effect.
C) the income effect of the higher interest rate is negative.
D) the substitution effect of the higher interest rate is positive.
Correct Answer:
Verified
Correct Answer:
Verified
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