Asked by Sharolyn Campbell on Jul 28, 2024
Verified
An increase in the interest rate can make a utility-maximizing lender become a borrower.
Utility-Maximizing
Represents the economic principle where individuals or firms make choices that result in the highest possible level of satisfaction or efficiency within their constraints.
Lender
An individual, institution, or entity that provides funds to another with the expectation that the funds will be repaid, often with interest.
- Investigate how interest rates affect decisions regarding savings and investments.
- Comprehend the role of the substitution and income effects in modifying consumption patterns due to shifts in interest rates.
Verified Answer
ZK
Zybrea KnightAug 03, 2024
Final Answer :
False
Explanation :
An increase in the interest rate makes lending more attractive due to higher returns, not borrowing.
Learning Objectives
- Investigate how interest rates affect decisions regarding savings and investments.
- Comprehend the role of the substitution and income effects in modifying consumption patterns due to shifts in interest rates.