A lower real interest rate __________ saving and __________ consumption spending.
A) increases;increases
B) increases;decreases
C) does not change;does not change
D) decreases;increases
E) decreases;decreases

Question

Quizplus · Accepted Answer

A decrease in real interest rates reduces the return on savings, making saving less attractive. Hence, households will keep less in savings and spend more on consumption. Therefore, a lower real interest rate decreases saving and increases consumption spending.

A Lower Real Interest Rate __________ Saving and __________ Consumption

A Lower Real Interest Rate Saving and Consumption