Question

1) If the substitution effect of the real interest rate on saving is smaller than the income effect of the real interest rate on saving, then a rise in the real interest rate leads to a in consumption and a_ _in saving, for someone who's a lender (saver). A) fall; fall B) fall; rise C) rise; fall D) rise, rise 2) For a borrower, an increase in the real interest rate will lead to A) higher current consumption and less borrowing. B) higher current consumption and less saving. C) lower current consumption and less borrowing. D) lower current consumption and less saving.

Answer 1

Ans1) the correct option is c) rise ; fall

Ans2) the correct option is c) lower current consumption and less borrowing.