Changes in future expected interest rates can affect current consumption.Suppose individuals expect future interest rates to decrease.Consumption will change as a result of this lower expected future interest rate because of its effects on which of the following?
A)human wealth
B)the value of stocks
C)the value of bonds
D)all of the above
E) none of the above

Question

Quizplus · Accepted Answer

Expected future interest rates are related to the value of human wealth, stocks, and bonds. 
- Lower expected future interest rates would increase the value of human wealth, leading to an increase in consumption. 
- Lower expected future interest rates would also increase the value of stocks, leading to an increase in consumption. 
- Lower expected future interest rates would decrease the value of bonds, leading to a decrease in consumption. 
Therefore, all of the above factors would be affected by changes in expected future interest rates and would impact current consumption.

Changes in Future Expected Interest Rates Can Affect Current Consumption