A household faces a higher interest rate on borrowed funds than on savings. Show that an increase in the interest rate on savings does not affect the amount of money borrowed and that an increase in the interest rate on loans does not affect the amount of savings.

Question

Quizplus · Accepted Answer

The Answer of A household faces a higher interest rate on borrowed funds than on savings. Show that an increase in the interest rate on savings does not affect the amount of money borrowed and that an increase in the interest rate on loans does not affect the amount of savings.

A Household Faces a Higher Interest Rate on Borrowed Funds