What could be caused by the substitution effect of an increase in the interest rate
A)an increase in consumption and saving when young
B)an increase in consumption when old and saving when young
C)an increase in consumption when young and saving when old
D)an increase in consumption and saving when old

Question

Quizplus · Accepted Answer

The substitution effect of an increase in the interest rate typically leads individuals to save more when young to take advantage of higher returns, resulting in increased consumption when old.

What Could Be Caused by the Substitution Effect of an Increase