An increase in the interest rate cannot make a lender who satisfies WARP become a borrower.

Name: An increase in the interest rate cannot make a lender who satisfies WARP become a borrower.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

According to the Weak Axiom of Revealed Preference (WARP), if a person prefers X to Y and then the price of Y decreases, they should still prefer X to Y. Therefore, an increase in interest rates would not make a lender, who has already revealed their preference for saving over borrowing, suddenly become a borrower.

An Increase in the Interest Rate Cannot Make a Lender