Q
If consumption when young and when old are both normal goods, an increase in the interest rate ?
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A
A. Will always increase the quantity of saving
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B
B. Will always decrease the quantity of saving
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C
C. Will increase the quantity of saving if the substitution effect outweighs the income effect
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D
D. Will increase the quantity of saving if the income effect outweighs the substitution effect
Correct Answer:
C. C. Will increase the quantity of saving if the substitution effect outweighs the income effect
