When the real interest rate increases, the demand for current consumption
A)shifts down.
B)moves along the demand curve.
C)shifts up.
D)increases for each level of current income.
E)remains constant.

Question

Quizplus · Accepted Answer

An increase in the real interest rate makes saving more attractive, so people will shift their preferences towards saving and away from current consumption. This will result in a downward shift in the demand for current consumption.

When the Real Interest Rate Increases, the Demand for Current