The intertemporal substitution effect refers to substitution of
A) goods and services for less expensive goods and services.
B) goods and services today for goods and services in the future.
C) goods for services.
D) goods and services produced domestically for goods and services produced in another country.

Question

Quizplus · Accepted Answer

The intertemporal substitution effect refers to the idea that people will choose to consume goods and services either now or in the future, based on their relative prices. When the price of goods and services today increases, people will tend to substitute towards consuming more goods and services in the future to save money. This is the intertemporal substitution effect.

The Intertemporal Substitution Effect Refers to Substitution of