Changes in interest rates cause the same rotations of intertemporal budget lines regardless of whether you are a borrower or a saver.

Question

Quizplus · Accepted Answer

Changes in interest rates affect borrowers and savers differently, causing their intertemporal budget lines to rotate in opposite directions. For savers, an increase in interest rates typically makes future consumption more attractive, rotating the budget line outward for future periods. For borrowers, an increase in interest rates makes borrowing more expensive, potentially rotating their budget line inward for future consumption.

Changes in Interest Rates Cause the Same Rotations of Intertemporal