A lender with no investment opportunities has equal income in period 0 and in period 1. Which of the following correctly describes the consequence of an increase in the interest rate?
A) Consumption in period 0 stays the same while consumption in period 1 decreases.
B) Consumption in period 0 stays the same while consumption in period 1 increases.
C) Consumption in period 0 increases while consumption in period 1 decreases.
D) Consumption in period 0 increases while consumption in period 1 increases.

Question

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The Answer of A lender with no investment opportunities has equal income in period 0 and in period 1. Which of the following correctly describes the consequence of an increase in the interest rate?
A) Consumption in period 0 stays the same while consumption in period 1 decreases.
B) Consumption in period 0 stays the same while consumption in period 1 increases.
C) Consumption in period 0 increases while consumption in period 1 decreases.
D) Consumption in period 0 increases while consumption in period 1 increases.

A Lender with No Investment Opportunities Has Equal Income in Period