As the interest rate increases,ceteris paribus,the trade-off between present and future consumption
A)Makes it more appealing to sacrifice current consumption.
B)Is not affected.
C)Encourages less saving.
D)Makes it less appealing to sacrifice present consumption.

Question

Quizplus · Accepted Answer

When the interest rate increases, saving becomes more attractive because the return on savings is higher. This makes it more appealing to sacrifice current consumption in favor of future consumption, as the money saved now will grow more due to the higher interest rate.

As the Interest Rate Increases,ceteris Paribus,the Trade-Off Between Present and Future