Ceteris paribus,in a closed economy,if consumers become more optimistic ________.
A)autonomous consumption would decrease
B)the equilibrium interest rate should increase
C)saving should increase
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

When consumers become more optimistic, they are likely to spend more rather than save. This increased spending raises the demand for goods and services, which can lead to higher investment demand. To finance this higher investment, the equilibrium interest rate would increase as the demand for loanable funds goes up. Choices A and C suggest a decrease in consumption and an increase in saving, which are not typical reactions to increased optimism in a closed economy.

Ceteris Paribus,in a Closed Economy,if Consumers Become More Optimistic ________