4297EconomicsMedium
If consumption when young and when old are both normal goods, an increase in the interest rate?
Awill increase the quantity of saving if the substitution effect outweighs the income effect
Bwill always decrease the quantity of saving
Cwill increase the quantity of saving if the income effect outweighs the substitution effect
Dwill always increase the quantity of saving
Correct answer
A. will increase the quantity of saving if the substitution effect outweighs the income effect
Explanation
The correct answer is will increase the quantity of saving if the substitution effect outweighs the income effect.