The demonstration effect suggests that people will save less when they
A)base their spending decisions (and consequently their saving decisions)on spending decisions of others who spend more than they do.
B)base their saving decisions on their projections of income and spending needs over their lifetime.
C)recognize that the real interest rate has increased.
D)control their spending in order to save more when the real interest rate increases.

Question

Quizplus · Accepted Answer

This is the definition of the "demonstration effect."

The Demonstration Effect Suggests That People Will Save Less When