How does the real interest affect households' decisions about saving?
What will be an ideal response?
All disposable income is either used for consumption or saving. The opportunity cost of consumption is the amount of foregone interest you could earn if you saved. The return to saving is the real interest rate, so the higher the real interest rate, the greater the opportunity cost of consuming and not saving. As a result, an increase in the real interest rate leads to an increase in the quantity households save.
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Which of the following is NOT a role of Federal Reserve Banks?
A) conduct discount lending B) serve on the FOMC C) set the interest rate on reserves D) manage check clearing in the banking system
_____ is an important determinant of its standard of living in the long run
a. A nation's net exports b. The productivity of a nation's resources c. A nation's population growth rate d. The deficit in a nation's capital account e. The deficit in a nation's current account
When the official dollar price of a foreign currency is lowered, the dollar is being
A) appreciated. B) overvalued. C) undervalued. D) devalued. E) revalued.
Which of the following is the money multiplier?
A. The required reserve ratio. B. 1/(1 - the required reserve ratio). C. 1/(required reserve ratio). D. 1/(1 - MPC).