Figure 15-1 Suppose an individual has Y dollars to allocate between spending this year (Co) or next year (C.). With an initial interest rate ofr, they choose to consume (Co*, C₁*). +) Y 1+ Y суд U₁ Us Co Lefer to Figure 15-1. If the interest rate rises to ', the effect on current savings will be a. a substitution effect that increases current savings and an income effect that reduces it. Ob. a substitution effect and income effect that both reduce current savings. Oca substitution effect and income effect that both increase current savings. Od. a substitution effect that reduces current savings and an income effect that increases it.

Figure 15-1 Suppose an individual has Y dollars to allocate between spending this year (Co) or next year (C.). With an initial interest rate ofr, they choose to consume (Co, C₁). +) Y 1+ Y суд U₁ Us Co Lefer to Figure 15-1. If the interest rate rises to ', the effect on current savings will be a. a substitution effect that increases current savings and an income effect that reduces it. Ob. a substitution effect and income effect that both reduce current savings. Oca substitution effect and income effect that both increase current savings. Od. a substitution effect that reduces current savings and an income effect that increases it.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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