Consider an exogenous increase in the real interest rate in the simple macro model. This will tend to cause
In desired consumption and in desired investment.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; a decrease
D) a decrease; no change
E) a decrease; an increase

Question

Quizplus · Accepted Answer

An exogenous increase in the real interest rate typically leads to a decrease in desired consumption and investment because borrowing costs are higher, making saving more attractive and borrowing less attractive.

Consider an Exogenous Increase in the Real Interest Rate in the Simple