Suppose pizzas are the only good and people have homothetic preferences. The supply of pizzas today is perfectly inelastic and determined solely by people's endowments. Which of the following would cause the interest rate to rise?
a. A 50% increase in pizza production, this year and throughout the future.
b. A 50% increase in this year's pizza production that is not expected to affect future harvests.
c. An expected 50% increase in future pizza production.
d. A hurricane that permanently destroys 50% of all pizza parlors.
c. An expected 50% increase in future pizza production.
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A) 5 units B) 4 units C) 3 units D) 2 units
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