Multiple Choice
Assume that Brenda has positive wealth. As the interest rate decreased, Brenda reduced her current consumption. For Brenda,
A) the substitution effect of an interest rate decrease outweighs the income effect.
B) the income effect of an interest rate decrease outweighs the substitution effect.
C) the substitution effect of an interest rate increase must be zero.
D) the income effect of an interest rate decrease must equal the substitution effect.
Correct Answer:
Verified
Correct Answer:
Verified
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