Figure 21-28
The figure below illustrates the preferences for a representative consumer, Christopher.
-Refer to Figure 21-28. Interest rates increase by 3 percent. Christopher's optimal choice point moves from A to B. Christopher consumes
A)less while he is younger and saves more than he did before interest rates increased.
B)more while he is younger and saves more than he did before interest rates increased.
C)less while he is younger and saves less than he did before interest rates increased.
D)more while he is younger and saves less than he did before interest rates increased.

Question

Figure 21-28
The figure below illustrates the preferences for a representative consumer, Christopher. 
-Refer to Figure 21-28. Interest rates increase by 3 percent. Christopher's optimal choice point moves from A to B. Christopher consumes
A)less while he is younger and saves more than he did before interest rates increased. 
B)more while he is younger and saves more than he did before interest rates increased. 
C)less while he is younger and saves less than he did before interest rates increased. 
D)more while he is younger and saves less than he did before interest rates increased.

Quizplus · Accepted Answer

When interest rates increase, the opportunity cost of consuming today rather than saving increases, leading Christopher to consume less while he is younger and save more for the future.

Figure 21-28 The Figure Below Illustrates the Preferences for a Representative Consumer