A higher real rate of interest ________ the reward for saving and ________ the amount people need to save to reach a given target.

Question

Quizplus · Accepted Answer

A higher real rate of interest increases the reward for saving since individuals will earn more in interest for their savings. However, at the same time, it decreases the amount people need to save to reach a given target because the higher interest rate allows their savings to grow more quickly. Therefore, the correct choice is B, which states that a higher real rate of interest increases the reward for saving and decreases the amount people need to save to reach a given target.

A Higher Real Rate of Interest ________ the Reward for Saving