If consumers choose to postpone consumption to have a more enjoyable future,the supply of loanable funds would increase and the market rate of interest would fall.

Question

Quizplus · Accepted Answer

When consumers choose to postpone consumption, they increase their savings which increases the supply of loanable funds in the market. As a result, the market rate of interest falls as lenders compete for borrowers. This is because there are more funds available for borrowing and hence the interest rates go down. Therefore, the statement is true.

If Consumers Choose to Postpone Consumption to Have a More