A small increase in the real interest rate will most likely
A)increase desired saving, but the effect will be relatively small.
B)increase desired saving substantially.
C)decrease desired saving substantially.
D)decrease desired saving, but the effect will be relatively small.

Question

Quizplus · Accepted Answer

An increase in the real interest rate makes saving more attractive because individuals can earn more on their savings. However, the effect on desired saving is generally relatively small because other factors also influence saving decisions.

A Small Increase in the Real Interest Rate Will Most