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

Question

Quizplus · Accepted Answer

When the real interest rate increases, it becomes more expensive to borrow money and therefore the incentive to save and postpone consumption also increases. As a result, the demand for current consumption shifts down.

When the Real Interest Rate Increases,the Demand for Current Consumption